Loan recovery undoubtedly is one of the major challenges for financial institutes throughout the globe. With the huge amount of loans turning into NPA (non-performing assets) or stressed assets, regulators are looking for ways in which bad loans can be adjusted and the balance sheets can be cleaned. Bad loans, no doubt, are harming the fundamentals on which the global banking system works. For instance, as on June 2016, the Indian banking industry alone had Rs. 6 lakh crore as gross NPA. Such a huge figure undoubtedly affects the economic fiber of the nation.
Can loan servicing software ease the loan recovery process?
Loan serving software is a tool through which loan is disbursing, collection management, investor accounting, and other related banking activities are managed. This software is not only flexible and highly secure, but according to an industry expert, is also the ideal solution for a mortgage, private money lenders, institutional loan servicers, medical loan servicing, microfinance loans, and government lending. Some of the major advantages of loan servicing software are:
- Instant access to critical and consolidated information
- Reduction in calculation errors
- Fast credit decisions and loan processing
- Enhance system security for all documentation and records
- Accurate tracking of loan charges and advances
- Easy compliance with regulatory requirements
The loan servicing software is highly systematic and easy to use, and this way it helps in easing the loan recovery process to a great extent. Organizations usually opt for either SaaS-based loan servicing software or on-premise loan servicing software. As large enterprises have the in-house IT support along with necessary back-up servers, they usually opt for on-premise loan servicing software. SMEs, on the other hand, go for SaaS-based loan servicing software, as they are cost-effective and does not require any extra software installation expenses.
Adoption of loan servicing software in APAC region
According to our market analysts, in 2016, the Americas held the largest market share in the global loan servicing software market. But being an early adopter of this technology, its share is sure to reduce in the next five years. Rather it is the APAC region which will witness an increase in the adoption of the loan servicing software. Until recently, most of the countries in the APAC region lagged behind in the use of the finance-related software. The major reason for this situation was a lack of the right infrastructure as well as the complex business process. But with initiatives of financial institutes in Japan, India, and Singapore the adoption of loan servicing software is catching up. It is expected that by 2021, the loan servicing software market in APAC will grow at a CAGR of 19%.
The three major reasons behind the growing market for loan servicing software are:
Need for automated process
Unlike the manual data-entry and paper submission process, the loan servicing software is an automated system which eases the account maintenance system as well as brings down the chances of errors. Post the 2008 financial crisis, the demand for lenders has increased significantly. As this software automates the loan decisions improving the overall speed of service, organizations are increasing switching to loan servicing software.
Need to comply with multiple regulations
Governments in the APAC region have enforced several acts and policies so that the incidence of frauds and financial scams can be reduced. The loan servicing software complies with cloud-related regulations, which makes it easier for users to comply with many of the government regulations. Especially in the case of mortgage banks and credit unions, the loan servicing software is highly useful as it meets all the necessary regulatory requirements.
Supports multiple loan types
Multiple loan types call for high operational costs, better loan portfolio quality, control over bad debts, and enhanced regulatory compliance. Meeting all these requirements is cost-intensive as well as requires a dedicated team. Loan servicing software, on the other hand, by supporting multiple loan origination eliminates the need for internal IT staff involvement. As the software supports a wide variety of loan industries and lending products, it is seen as a one-stop solution for all loan-related activities.
Overall, it might be too early to conclude that APAC will be the hub of loan servicing software in the next five years. But there is no denying the fact that this region is sure to witness a tremendous growth in the adoption of the loan servicing software.
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