Have the benefits of digital transformation finally arrived for Funding Operations?

The current typical process of funding loan books through securitisation is often characterised by inefficiency and high costs. This can be described in more detail as follows:

1. Costs: The securitisation process often involves substantial expenses related to legal fees, auditor involvement, and other transaction costs. These expenses can significantly impact the overall cost of funding loans and reduce margins.

2. Time-intensive: Securitisation transactions typically require significant time to complete due to the complex nature of the process. Multiple verification steps, legal documentation, and coordination with various parties involved can lead to delays in loan funding.

3. Manual processes: Many aspects of securitisation, such as document preparation, verification of borrower information, compliance checks, and approvals still heavily rely on manual steps. This manual handling increases the risk of errors, adds to the processing time, and can be resource intensive.

4. Verification complexities: Securitisation often necessitates extensive verification processes to ensure loan quality and compliance. These verifications involve reviewing borrower documents, assessing creditworthiness, and evaluating collateral. The complexity of these verification procedures can contribute to delays and higher costs.

5. Auditor and lawyer involvement: Securitisation transactions typically require significant involvement from auditors and lawyers to ensure compliance, structure the deals, and mitigate legal risks. Their involvement adds to the time and costs associated with the process.

These factors create challenges for Treasury teams which are a catalyst to exploring alternative funding mechanisms or process improvements to enhance efficiency and reduce costs.

Sencilio, the next generation in lending platform, offers enhancements which involve the automation of loan data collation to match investor risk and return profiles, along with the utilisation of smart contracts to automate the investment structure design and implementation.

By automating the collation of loan data, the process becomes more efficient and accurate. Advanced algorithms and data analytics can be employed to assess the risk and return characteristics of each loan, allowing for better alignment with the preferences and requirements of potential investors. This automation reduces the need for manual analysis and decision-making, saving time and effort.

The use of smart contracts further streamlines the securitisation process. Smart contracts are self-executing agreements that automatically enforce predefined terms and conditions. They enable automation of compliance checks, reducing the reliance on manual verification processes. Smart contracts also provide transparency and immutability, as all contractual terms and transactions are recorded on a blockchain. This transparency enhances trust among stakeholders and simplifies auditing processes.

The integration of smart contracts into the investment structure offers several benefits. It improves efficiency by automating various steps, such as loan verification, cash flow distributions, and investor reporting. This automation reduces human error and speeds up the overall process. Additionally, smart contracts can contribute to cost reduction by minimising the need for intermediaries and reducing the involvement of auditors and lawyers.

In summary, the enhancement to the traditional securitisation approach through the automation of loan data collation and the use of smart contracts brings the potential for improved efficiency, automated compliance, reduced time, and cost savings. 

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