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Optimising the loan origination process - important aspects

Lars Gaustad / July 04, 2022

The loan origination process is one of the most critical business processes for any bank. At least 50% of a bank’s total revenues come from net interest income. For many banks, this is about 80% of their total revenues (financial statements from selected Nordic banks).


The loan origination process includes risk assessments, a decision, offering a competitive price, assessment, and setup of the correct and necessary collateral, then loan and credit production. The final step is payments to the recipient, as specified in the loan agreement. Each step must be consistent with the bank’s business policy and current rules and legislation.

The loan origination process is traditionally a complex manual process which is executed by different specialists in the banks, using a wide range of tools and procedures to process loan applications and produce the different loan and credit products.

Core factors

The ability to reach customers and provide the necessary service and guidance affects the volume of new credit. The quality of risk assessments and the decision-making process affects profitability, as well as future losses. Setting the appropriate price level optimizes a bank’s net interest income.

Loan Origination Systems

Streamlining banks’ operations, increasing their efficiency, and improving the quality of the process and credit decisions has involved an evolution from manual rule-based processes to increasingly system-based support, binding the whole process together. It starts with fetching the application from different sources, guiding and documenting the origination process, production of relevant documents, then credit product production. The processing of payments in accordance with the loan agreement is also included in Loan Origination Systems (LOS).

Tietoevry has more than 25 years of experience with development and delivery of LOS in the Nordics. During this time, we have closely monitored developments, changes, and all new opportunities within this area and we have developed great experience in such solutions.


Although extensive system support is already in place, there is a continuous need for change and improvement, due to constantly changing rules and legislation. For example, the European Banking Authority has been working since 2011 to establish harmonized regulation across the EU to increase financial stability.

Opportunities for digitalization are increasing day by day. One important example is how BankID simplifies and automates the authentication and digital signature process in Norway, with its legally-binding status. Other examples are access to property registers, digital access to tax reports and salary information. Each country’s digital infrastructure and the level of digitalization possible varies.

Customer expectations regarding the way they interact with banks are changing, and banks need to interact with them using the interfaces they prefer. This includes mobile devices, PCs and in-person contact.

The loan origination process is critical to both the banks’ income and costs, making it crucial for banks to implement improvements and changes associated with new technology, regulatory changes and customer expectations.

How can banks manage this ever-changing landscape to retain and improve their competitiveness?

It is our experience that the key success factors are a clear strategy and guidance for direction, prioritizations which are aligned with the bank’s strategy, and choosing the best, long-lasting technology.

Which areas should receive highest priority?

It is Tietoevry’s experience as a provider of LOS to around 100 banks in Norway and Sweden during the past 25 years that there are three areas in particular which need to be prioritised. These three areas all impact on banks’ competitiveness.

The first is implementation of the highest possible degree of digitalization in the loan origination process, then exploiting this to automate and improve process efficiency, offering a better user experience and improving process quality, thereby reducing the bank’s risk. A key factor is observing developments in new digital infrastructure and adopting them. Tietoevry is part of the cooperation between the public and private sector for infrastructure development and standardization, and is monitoring the growing opportunities in the Nordic region.

The second area is changes in compliance requirements. These rules and legislation should be integrated into the Loan Origination System, so that banks no longer use manual procedures. This will increase the banks’ efficiency and guarantee a high level of compliance with the statutory rules and legislation.

The third area is to offer solutions which meet customer expectations, resulting in high customer satisfaction and a good reputation for the bank. Customers expect to be able to interact via their preferred channels, using tools that are user-friendly and easy to understand, and many customers continue to need support from bank advisors.

Positioning strategies to prioritise competitiveness measures

Technology decisions

LOS software providers need to handle every part of the process. Success here requires deep competence in many areas. When this competence organisation is in place, it must target development in the areas which optimise business value. These resources should not have to struggle with technical issues associated with desupported software. Such tasks cannot be completely avoided, but decision-making processes regarding technology should focus on choosing technology that is likely to have a long life. The objective of the risk assessments should be to select long-lasting technology and standards. In the long run, it is wise to avoid special tools and software from single vendors, even if they offer attractive features, and to choose standardized tools which are not dependent on specific providers.

Flexible architecture

When possible and appropriate, parts of the solutions can and should be designed as separate modules that can also be implemented in other areas than originally intended. To achieve this, architecture governance and transparency around architectural choices are critical.

Being prepared for major development and improvements

LOS providers must always strive to have the right competence on the building blocks of LOS. This includes deep technical knowledge, an understanding of the architecture, an understanding of the business the software is intended to manage and always looking for opportunities for development with the potential to increase the competitiveness of the banks that use LOS.

Avoid development that does not increase competitiveness

Finally, to maintain capacity for development which leads to substantial improvement of LOS, it is important to avoid minor development work which does not increase the competitiveness of the banks which use LOS.

Excellent opportunities for the future

Tietoevry has embarked on the journey to maximize use of all existing LOS software and is reshaping such into flexible modules which will represent the next-generation LOS. This architecture will offer enhanced flexibility for future change, and it will protect and utilize all the investment that is built into the current version of the LOS, resulting in new and improved capabilities.

Eager to learn more? Contact us!

Lars Gaustad
Head of Business Development


Lars Gaustad

Head of Business Development

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