Strategies for Deploying a Small Business Auto Decision

In my first blog, we addressed the definition of auto decision and financial institution Culture. The second blog looked at data analysis. We will round out discussion with some additional guidance and the creation of your strategies.

Auto Decision Is For a Limited Dollar and Product Set.

• No financial institution uses auto decision for every loan type and dollar amount. If they tell you that, they are most likely manually reviewing each loan approval and decline.  And, as noted in my first blog, that is not auto decision. That is manual underwriting.
• Traditionally, we recommend a bank or credit union begin auto decisioning at $50,000 or less in total exposure with a limited product set (credit cards, overdraft lines, small lines of credit). The dollar threshold should be one where the financial institution can be comfortable with the system making the decision. If credit administration feels each credit still needs a human touch, then the dollar threshold is too high or you are not ready to auto decision.

Auto decision is a great way to gain efficiency and speed in your underwriting process. But it must be done in a way that reflects your manual underwriting processes AND is compliant with the various regulations, like disparate treatment and score card validations.

In my next blog, we will talk about how auto decisioning requires a long-term commitment.

Author Bio

As Director of Advisory Services, Stephanie Butler guides the implementation and strategic consulting for new and existing Baker Hill clients. Butler coordinates the Business Process Consultant team and is responsible for analyzing client goals and objectives and providing recommendations for best practices. Relying on more than 25 years of experience within the financial services industry, she successfully maintains a client base of banks and credit unions ranging from $100 million to $100 billion in asset size.

Butler earned her bachelor’s degree in Accounting from Davenport University and received her master’s degree in Management from Aquinas College.