Loans Processing Systems in European Retail Banking

Scope

The development of packaged core systems in the context of decreased enthusiasm for in-house development

The increased adoption of outsourcing as a means of attaining transparency to the unit cost of a mortgage, including application outsourcing and BPO

The increased move towards STP in the loans application process, especially in mortgages which are still mostly paper based

Report Highlights

As retail banks and lenders across Europe are struggling to come to terms with the cost of their core systems the development of loans systems has remained a high priority due to its profit generation capability. The market has now
shifted to the point where the use of packaged core systems is accepted as a viable, and even preferable, alternative to in-house development. This is in stark contrast to the acceptance of packaged core systems in other lines of business in large retail banks.

Reasons to Purchase

Banks seeking to replace their legacy loans processing core system will gain insight to the trends in overall in the field of loans processing

Vendors addressing the loans processing market will find a sounding of the latest development across Europe

Vendors seeking to make the highly challenging move to new loans markets will find insight to support the decision making process

ACTION POINTS

1. Lenders must seek to use technological and operational change to become lowest cost producers of mortgages as well as innovators on product.

2. Packaged loans applications have developed to the point where banks seeking to replace their existing systems must consider a packaged application before in-house development.

3. Recognizing the geographic limitations of the loans application market vendors must seek to ensure maximization of their product footprint within banks, or move into the outsourcing/BPO space.

MARKET CONTEXT

Loans, and mortgages in particular, are the primary revenue generators for retail banks across Europe. Considering the good performance of retail lending overall banks are investing both to attain economies of scale as well as to
improve their product creation capability.

To this end banks are taking two new approaches:

The implementation of packaged core systems

The outsourcing of both the mortgage application and the mortgage processing

FUTURE FOCUS

The mortgage application market is dominated by the United Kingdom with 28% of the total market. The fastest growth rate, however, is found in Italy where the development of loans overall is still in progress with only 20% of GDP in
outstanding loans, compared to 50% in the United Kingdom.

DATASETS

Table 1: European house price % change from previous year

Table 2: European mortgages advanced 1999, Euros bn

Table 3: The pros and cons of packaged vs. in-house application development

Table 4: European loans applications market, 2002-2005 US$m

Table 5: European loans applications market, 2002-2005

Table 6: European packaged core systems license market 2001-2005, US$m