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The Power of Agile Methodology for Fintech & Lending

The Power of Agile Methodology for Fintech & Lending

The agile methodology, in some form or another, has been around for a while now. Almost unbelievably, as far back as the late 1950s. Originally conceived as a solution for software development, the agile method is an iterative approach that breaks up projects into phases to be implemented. Unlike a linear method, such as the waterfall strategy, agile holds no strict step-by-step guide and instead draws its strength from its adaptability and cooperation. According to Ambysoft’s 2013 Project Success Rates Survey, the agile approach has a success rate of 64%, which is higher than the 49% success rate of the waterfall model.

Its effectiveness means there’s no surprise in why businesses, and not just software developers, are increasingly using agile to manage their workflow. As for 2022, Agile is being utilized by no less than 71% of companies in the United States. Banks and financial institutions, including lending businesses, are no exception, even if there are some speed bumps along the way. 

Here we’ll take a look at the benefits of agile for banks and financial companies and examine why they continue to face challenges implementing agile to their businesses.

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What’s Preventing the Agile Uptake?

The financial world is fast-moving, the markets and conditions change on an almost daily basis. So, it makes sense that technology would too, right? Unfortunately, this hasn’t quite been the case. 

Innate cultural blockers

In practice, banks and traditional lenders tend to be highly organized, structured organizations, wherein everyone has a specific role and duties. In essence, this practice tends to conflict with the agile methodology as it remains steadfast and inflexible, creating organizational silos. What this means in practice is that agile teams tend to become isolated and their effect on the wider corporate structure is reduced.

Decisions take time (too much of it)

Risk is an integral part of the financial industry and lending in particular, or more specifically, minimizing it. In its nature, agile may seem like a risky investment — it’s fast-moving, rapidly changing, and requires decisions to be taken. This presents challenges for finance managers who need to know all the risks first, then make decisions later.

Why Should Financial Services Reconsider Their Approach to Agile NOW?

Yet, despite the challenges, there are some positive arguments for fintechs and lenders for integrating an agile approach. Here’s why you need to get agile lending solutions on board.

Adapting to change

In the last year alone, we have observed a rapid development in the banking and fintech sector. Not only are branches closing faster than ever before, but more traditional banks are opening online credit services and lending fintechs are springing up all over the world. It’s an exciting time for finance, but it is one that demands great structural change, not just lip-service to remote working and digital tech. Financial organizations will need to adopt authentic technology at a much faster rate than before while ensuring quality and security. Agile delivers a vital solution due to its fast timeline and ability to be integrated into current systems.  

Competing in the modern market

The increase in challenger banks has posed an unforeseen risk to traditional brick and mortar facilities. Many believed it would take longer to build trust and dedication with modern loan management software. However, their popularity is advancing at a rapid pace. Partly, this may be due to the speed and ease of account opening, which satisfies the needs of many borrowers. For traditional facilities to keep up, they will need to look at how they can adapt their lending business for digital natives, not impose more challenges.

Resolving challenges

Every organization has its issues, big or small, blockers or minor, lending providers are no exception. The issues start to occur when employees must follow a set of undeviating guidelines to solve an issue instead of a more intuitive approach. Agile offers an ongoing problem-solving capacity that helps banks and lenders to adjust to the challenges they are currently experiencing, not past problems. 

Testing new strategies

Normally, in order to test out a hypothesis and see if it would work, it would cost your company a considerable amount of time and money. Agile gets this done in a fraction of the time and sometimes cost. By deploying, monitoring, and amending procedures, agile can quickly determine how well they will work. For example, say you want to examine the effects of an AI-based risk management application for your lending segment, this can be quickly implemented, tested, deployed, and assessed for effectiveness. 

Meeting the demands of customers

Your clients expect speed. Gone are the days when a visit to the bank for a loan or investment was the highlight of the day. Now, customers demand service at their fingertips, ease-of-use, and decisions more quickly than ever. Simply, they respect their time. To meet the changing needs of the market, traditional and alternative lenders need to look at new ways to manage risk, while maintaining client satisfaction. Agile allows businesses to do so, as new approaches can be rolled out or scaled back quickly to reflect market need.  

Having common goals

One of the challenges of many industries is that teams tend to work in silos, focused only on their own little ‘part.’ While agile does encourage breaking the work into iterations, there is one area it excels more so than traditional methods — keeping the team focused on one goal. So whether it’s a customer-facing role to the company accountant, the overall goal is clear for everyone, and each member has a responsibility in making that goal a reality. This is the beauty of agile — its cross-functional cooperation model.

How to Move to Agile and Make It Work?

Onboarding an agile approach might seem like the ideal move to make to get more work done and faster. And it is. However, that doesn’t mean that it doesn’t have downsides. Agile isn’t just a methodology, it’s an organizational-wide strategy. For it to have a sizable impact on your business, you will need to embrace it across all areas — from the front office staff to compliance to support and everything in between.

Commit to organizational change

One of the biggest challenges many businesses find is the cultural and internal changes to the working process. For agile to work successfully, this needs to be an organization-wide approach. Alongside making it clear that an agile approach is in the works, it’s important to get the company ready by re-organizing teams by function, not just job role — for example, loan origination. In addition, to ensure the change is worth it, it’s vital to adopt clear metrics that highlight progress (or lack of it) to allow you to adapt the strategy to work for you. Next, let it scale. That means empowering your team to take action and implement the changes needed for success.

Recognize agile isn’t tech, it’s a mindset

Part of adopting agile isn’t just tech. It’s about teamwork, and this can be challenging, especially for organizations with already well-established teams and processes. Alongside changes to your team structure, as mentioned above, the approach to employees may need to be altered. Teamwork and the ability to work together, not in silos, to get results is crucial, that’s why investing in team-building processes and events can make all the difference.

Expect speed bumps along the way

No approach is without its downsides. Agile is no exception. That’s why it’s important to remember when things get tough or don’t seem to be working as expected to persevere. What that might look like depends on the situation. Whether you need to take a step back and analyze some metrics to adjust, keep going, and wait for it to ‘click,’ or change course. What’s vital is keeping agile at the heart of your strategy.

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Wrapping Up: Is Agile Worth It?

Is the stress of adapting to agile worth it — absolutely! For companies that have already implemented the strategy, we have seen faster-to-market time and productivity increases across the board. But that’s not all. Alongside simply being busy, quality results have risen, and employees report being more engaged and satisfied in the working process. That’s why, despite the challenges of its adoption, agile is worth the effort.

Want to empower lending? Get in touch with HES for cutting-edge software.

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