The next big thing in bank technology, in my opinion, after banks get their mobile banking and mobile payments platforms sorted out, will be the building of systems to handle loans online and over mobile devices. A recent survey showed that while only 18% of banks offer completely online loans today, 71% intend to by 2013; this is a huge crevasse to cover in two and a half years. Yesterday we spoke with a pioneer in this area — Dennis Risinger, CIO at Jefferson City, Mo.-based rural lender FCS Financial ($2.5 billion in assets, 250 employees), about how he's taking loan handling paperless — for now, via document imaging, but in the future through online applications that run on user-friendly platforms such as the iPad.
BS&T: I've heard that you use an iPad. What do you use it for?
Risinger: I'm an early adopter at our company. Our company is testing it for mobile use by commercial loan officers in the field. On my iPad, I've integrated my Outlook email and calendar, my Cisco VPN client runs on it so I can remote into our network, and I've got a Microsoft Remote Desktop Protocol client on it that I use to remote to any of our servers just like the thin client technology on our regular desktops and laptops. I use the iPad for all our business apps — Office, Word, Excel, PowerPoint, Microsoft CRM, and our document management repository. I've made it just like my laptop but with the added convenience of a lot more mobility.
BS&T: So you could pretty much do anything that you can do on your desktop.
Risinger: Yes. They make a portable wireless keyboard for it; I've got the keyboard that includes a docking station. I like that pretty well, but I don't carry it when I'm out and about. I'm very pleased with it so far.
BS&T: Do you think you would ever conduct the entire loan process over an iPad?
Risinger: I think we will get there. We're moving an electronic loan application over to it. We've had this on our laptops for our mobile loan officers for some time, it's Excel based but we are developing it as a web app on the iPad. With the 3G wireless connectivity we have in many parts of our state, coupled with acceleration technologies, I believe that will be very effective.
BS&T: Have you taken loans paperless or have you reduced the paper used?
Risinger: I haven't seen that Nirvana state of total paperlessness yet. We've drastically reduced the amount of paper in our loan processes by leveraging technologies like scanning.
BS&T: Can you describe the process you have for handling loans?
Risinger: We have scanning MFP devices in all of our offices; in some offices we have Canon standalone scanners as well. Each of those devices is connected to a PC running Nuance’s eCopy ShareScan, which drives the scanning function. So an employee can walk up to any image capture point, push a button on an LCD panel, and scan a document into our document management software, a shared drive or a workflow process. That converts that paper, such as a customer tax return or some other document that will start the loan verification process into an online file.
BS&T: Does the software automatically convert those documents to searchable text?
Risinger: Yes. And we convert them to PDF with searchable text and route them, in some cases, to our document management system, which is currently Alchemy. We're in the process of moving to OpenText LiveLink. Some workflows are built into the document management system. Other documents the user might email to the underwriting department or another unit that needs to review it. It all starts at the scanner.
BS&T: Does the image capture and character recognition software recognize and classify documents automatically?
Risinger: We have not taken it to that level yet. We're in the process of adding the ability to create barcodes for all software-generated loan documents. That will enable those documents to be automatically routed to the appropriate folder or location in the document management store.
BS&T: How much faster is this than what you used to do?
Risinger: Early on, when we were first moving through it, employees told us they felt it was 50% faster, and I think we have come close to that level of improvement. A cost analysis showed savings in the neighborhood of 10-12%.
BS&T: Was that mostly through reduced postage?
Risinger: It was a combination of postage, phone calls and the direct labor time involved in the process.BS&T: What stops financial institutions from going to online loans, so that you don't have to have paper at all?
Risinger: Part of it is we're steeped in tradition, we've gotten used to it. Banking and insurance, in my opinion, are among the slowest industries to go to electronic records and electronic workflows. Security is the first barrier we throw up around these areas, but I think often that's an excuse we hide behind. Sometimes size and scale and availability of resources are the reason. A lot of community banks out there have limited staffs, resources and time. We couldn't do some of the things we're doing technology-wise if we didn't collaborate with fellow farm credit associations to share resources. When we built our loan origination application on top of Microsoft CRM, that was a collaboration with three other farm credit associations, which collectively put us in the $50 billion asset bracket and over 1,000 employees. And small banks are often apprehensive about outsourcing or bringing a contractor in, paying all that money and hoping and praying that it comes out right.
BS&T: When do you think you'll go live with your iPad-based loans?
Risinger: We're in the early pilot phase now, I'll know more once we get the electronic loan application on the iPad, then make sure we're comfortable with security and communication. We're probably 18-24 months out before we'll have a product introduction around that.
BS&T: I've been told that FCS Financial has been experiencing double-digit growth rates. How are you doing that when lending overall is pretty flat?
Risinger: We did go through a downturn last year like many in the financial services industry. Our growth tapered off last year — although it was in the 8-9% range, it had been averaging in the 18-20% range for five years prior to that, but we've remained profitable. Our net income last year was half what it was the year before, but we're still in the black and we have not gone into losses. That's not to say we didn't have credit portfolio issues we had to work through with a lot of our customers.
BS&T: But what's your secret to growing during a recession?
Risinger: We're not immune to the recession. We lend to farmers in the state of Missouri and larger processing companies out of our capital markets unit in St. Louis, companies like Tyson Foods, the chicken processors. It's all food and agriculture related. I don't know if we've got a secret other than being in an industry that's in demand that needs capital to continue to grow.