Buy Versus Build: A Compelling Case

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By David Ratnage, Senior Director, Moody’s Analytics

New technology is a major driver of change in financial services as banks seek to gain competitive advantage by retaining and expanding their customer base and increasing profitability.

Technology investment in banks has been significant in the last 15 years, but has largely focused on regulatory compliance or risk simulation with little investment taking place on front-end system upgrades and enhancements. In the case of commercial loan management this has resulted in an aging, disparate system landscape.

Commercial lenders have now started to embrace new technologies, building their own platforms using internal resources or purchasing solutions from established vendors. Benefits of these investments include:

  • Reduced time-to-decision on loan approvals
  • Improved risk management processes
  • Enhanced data integrity
  • Reduced concentration risk with optimized performance assessment
  • Ability to be more proactive reactive through better reporting and analysis

There are four factors banks should consider when deciding on a buy or build approach for commercial banking credit risk management systems.

  1. Fully understand the complexities of commercial credit management
  2. Detail the costs associated with buy vs. build options
  3. Understand the flexibility of the system to adapt to future market or technology changes
  4. Ensure robust controls are in place to protect the network and data

Read the full whitepaper to learn how you can leverage technology to transform your commercial credit origination process.