As an individual lender, a bank, non-bank financial company, or any other financial institution, you examine the prospective borrower’s bank statements to determine whether to lend them money.
A bank statement is one of the most reliable sources for seeing all of your prospective borrower’s transactions and trends over time. However, during this situation, lenders face several challenges, including fraud.
According to the RBI’s Report on Trend and Progress of Banking in India 2021-22, the reported number of fraud instances in various banking operations grew to 4,071 in the first half of the fiscal year 2021-22, up from 3,499 the previous year.
In a survey by Deloitte India, banking fraud in India is expected to rise in the next two years. As a result of the COVID-19 epidemic, the country’s digital transactions have increased, and remote working has been encouraged. Banks, however, believe that these reforms will significantly boost banking fraud over the next two years.
Using bank statement analysis software, lenders can solve all these problems at once. It provides real-time analytics by utilising advanced Artificial Intelligence (AI). As a result, it allows for speedier processing times, increased efficiency, fraud prevention, and document processing.
What is Bank Statement Analysis and How Does it Work?
The bank statement analysis software minimises errors caused by manually analysing bank statements for lending. Instead, it automates the process. Automation frees up the workforce for core duties and increases overall productivity by reducing human effort.
The BSA tool generates a real-time comprehensive bank statement analysis report for the uploaded or fetched bank statements, providing a 360-degree perspective of the loan applicant’s financial health.
This data enables lenders to quickly gauge and extract financial information and derive insights based on account activity states.
For example, a bank statement analysis aims to map cash inflows and outflows, penalty charges, vendor payments, and defaults (if any) to determine an individual’s repayment capacity and creditworthiness.
What You Need to Look for When Selecting a Bank Statement Analysis Software?
Bank statement analysis is not a one-size-fits-all solution since each financial institution is different, and there are several other document formats for statements.
However, here are some key features to look for if you’re looking to invest in good BSA software:
1. Ability to adapt
When it comes to printing statements, each bank has its format. Therefore, effective bank statement analysis software must read unstructured data, organise it, and present it more user-friendly.
Typical bank statements have a variety of formats, narratives, and layouts. Therefore, a crucial feature of cutting-edge bank statement analysis software is its ability to adapt to various document formats and styles.
The software uses machine learning algorithms to perform a deep analysis of the applicant’s financial health by categorising and analysing bank statements from multiple bank accounts.
2. Accurate
PDF to Excel conversions are used in bank statement analysis to read tabular data from scanned documents and enter it into spreadsheets for cash flow analysis.
Unfortunately, most OCR solutions encounter problems extracting PDF data and parsing values.
If you’re investing in bank statement analysis software, be sure it has a high level of data accuracy when entering data and can detect fraudulent entries.
3. Data validation and account aggregator integration
To analyse the financial health of borrowers, financial statements must be compared to income tax data, GST filings, and other documentation. Validating entered data, comparing it to other sources, and ensuring the legitimacy of the entries are all capabilities of good BSA software applications.
The bank statement analysis software must use AI-driven patterns to recognise complicated financial data transactions from different sources, such as loans, credit cards, investment accounts, taxes, and other financial data.
The bank statement analysis software combines them into a single platform that is easily legible and observable for an individual or a small business.
In addition, the account aggregator integration supports a next-generation lending procedure that is both efficient and effective.
4. Review
Users should review data taken from bank statements once it has been generated. If the software identifies missing values or discrepancies during data extraction, it should flag anomalies and provide alerts or notifications to users, requiring a manual review.
The BSA software must generate a detailed report that includes key insights and trends from the applicant’s financials, such as spending patterns, income obligations, moratoriums, and more.
The BSA must also aid in the removal of circular transactions and other critical information. By retrieving bank statements directly from the bank or scanning e-statements in seconds, the software provides a seamless experience.
5. Fraud detection
The bank statement analysis software helps comprehend the borrower’s repayment history. Through a comprehensive and detailed investigation, any occurrence of non-payment of loan default could be identified.
For instance, the software looks for behaviours that could be considered red flags and indicate a lack of creditworthiness. For example, periods when debit transactions equal credit transactions or a discrepancy between the statement and computed balances. Hence, you will save both times as well as money.
BSA software can be seamlessly integrated into your existing systems to complement the loan origination and assessment journey. Its efficiency is based on its ability to generate reports in both human and machine formats.
This makes evaluating the applicants’ creditworthiness easier and faster, whether without or with human intervention.
Bank statement analysis software evaluates several pages of bank statements online, allowing for quicker decision-making in less time and at a lower cost.
The automated process cuts down on processing a loan application, which benefits both lenders and borrowers while also improving customer satisfaction. A good BSA, therefore, aids in evaluating the borrower’s liabilities, which may impact their ability to repay the loan.
Why Should you Choose Precisa?
With its seamless connection into your existing lending management system, Precisa’s bank statement analysis software allows you to restructure your bank statement analysis process completely.
Precisa provides a complete real-time view of the bank statements, allowing for a detailed examination of the applicant’s financial analysis. This enables a thorough evaluation of the applicant’s creditworthiness and faster turnaround and decision-making on the lender’s side.
Customer satisfaction improves, thanks to the spot-on decisions and the BSA’s agility, and the results: better customer relations, more business, and more customer retention.
To know more, book a demo with Precisa today!
Mumbai