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Lending, Still a Seat-Of-The-Pants Business


Like Oracle's Relational Database Management System, I put three somewhat disparate data exhibits together from Automation in Banking - 2014, and produced a fourth exhibit.  I'm not selling anything so draw your own conclusions.  I'll just supply the facts and the fourth-grade math:

Exhibit A    There are 20,500 Financial Institutions in the world.
        Half of them are credit unions and therefore, they are not likely to make         commercial loans.
        That means, in this context, the base population is 10,250. 
        One might want to whittle that number further because some commercial loans are so simple that a good auto loan system would suffice.

Exhibit B    There are 64 brand name core systems currently sold in the world.  I've been         tracking them for years so I know they are reliable.

Exhibit C    There are 6 commercial loan systems (not part of core) in the world that I have labeled, "outside the box" systems.  Never before have these six names         appeared together on one sheet of paper.  So a good researcher might want         proof of their legitimacy.  To that I say, find a better sage.
        1,261 FIs are using one of the six, thus representing 12% of the base population.

My Conclusion

For what it's worth, I find this analysis startling, because we all know that in banking, commercial lending is the money maker or the destroyer.  So the question is, if six people stepped out of their cave to invent something that would contribute readily a strong layer of risk management, why would 88% of the world's FIs not embrace it?  Thus the reason for my choice of titles for this blog.

Full Disclosure:  I know the six companies in this blog.  I was once a customer of one of them.  I have included all of them in my annual research report for years, without regret.  When they report their customer numbers, even the SEC will rubber stamp them.  Thus the exact number of 1,261.  I do not mean that the commercial loans systems integrated in the 64 core systems are not worthy.  They are responding to a noble set of requirements developed by accountants, regulators and bank operations people.  They just left out the "what-ifs."  The 2008 financial crisis proved we now live in a what-if world and banks need systems that think, not just compute.

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