Using a Blockchain-Based Document Management System to Speed up the Loan Process
Softjourn

Using a Blockchain-Based Document Management System to Speed up the Loan Process

December 03, 2019 by Softjourn


Recently one of our clients – $50 billion dollar California bank – decided to perform a Proof of Concept project (POC) with Softjourn to determine proper use cases and plan investments in blockchain technology in relation to the future innovative solutions for their customers. 

The findings of the project are an important source of knowledge and inspiration for future development as well as risk minimization. 

Background 

Blockchain and distributed ledger technology has been a key area for exploration inside and outside of the traditional financial institutions for the last few years. The potential applicability of blockchain to facilitate business is very broad, which is why it gets so much attention. Blockchain represents a growing opportunity for telecoms, logistics, insurances and many other industries. But the financial services industry remains the lead in blockchain exploration and implementation. 

The Need

One of the most important factors to ensure a seamless loan granting process is flexibility. For financial institutions that means the ability to determine the “red flags” when monitoring the loan and performing the necessary actions to treat the loan in the correct manner. The process of loan monitoring involves different teams with different levels of responsibility. Each level has its own rights and areas of decision making. An instrument is needed to help make decisions about the actions that should be taken with the loan and these decisions should be based on all the available historical data about the credit line and should be approved by the stakeholders on all levels.

The collaboration tool has all the available data about the loan at one place and can speed up interdepartmental cooperation.

The Solution

Once the Softjourn team and the client agree that blockchain technology can be used to create the collaboration tool between the organizations and departments involved in the loan process, credit is approved -and a smart contract is generated that reflects the terms agreed upon. Then each participant can add the proper information related to the loan process. 

The workflow is as follows:

  1. The user creates a new credit line .
  2. New data about the credit line is stored at the backend server and is imported to the chaincode via NodeJS SDK library.
  3. The Chaincode is responsible for validating the data.
  4. After the validation the transaction is emulated in every peer to check which transaction is valid. Once the transaction is validated it is submitted in blockchain, otherwise it is marked as rejected.
  5. When creating a proposal for the sales team, the POC backend server triggers the chaincode to get the latest data about the credit line (forecast or actual financial statement).
  6. The actual configured proposal is also saved in the blockchain.
  7. Any response or comment is recorded as a transaction in the blockchain.

The Benefits

The average bank sifts through thousands of documents and images every year, a complex and time-consuming process that requires their staff to pour over enrollment forms, client applications, financial statements and more. The right document management solutions allow banks to easily capture and extract vital information from any paper or electronic document, including:

  • Checks
  • Financial statements
  • Online forms
  • Credit card applications
  • Mortgage origination files
  • Property titles 

Implementation of the solution described will:

  • Expedite document processing cycles. Document management solutions can speed up the document processing cycle by optimizing the availability of funds through the scanning of various document types, information extraction or automated document sorting. Blockchain adds immutability to all of these advantages. Immutability has the potential to transform the auditing process into a quick, efficient, and cost-effective procedure, and bring more trust and integrity to the data businesses use and share every day.
  • Ensure compliance with changing regulations. Bank regulations are always changing and evolving, so it’s important for banks of all shapes and sizes to keep up. That’s where document management software can play a key role. By offering complete, auditable and secure data capture, document management solutions help to ensure compliance with important regulations like the Payment Card Industry Data Security Standard (PCI) and Dodd-Frank, along with key regulations from the Consumer Financial Protection Bureau. Blockchain features allow financial institutions to update information according to the new regulations and still hold the history of changes and the reasons why in the ledger.
  • Provide first-rate customer service. For banks, document management solutions provide a major benefit because they can accurately and quickly help resolve inquiries with valuable information captured from customer and client documents. You’re no longer required to sort through hundreds of pages to address a customer or a staff request. Instead, you can simply leverage document management software to instantly find what you need. Blockchain solutions hold all updates of relationships with the client in the ledger history. 
  • Improve decision making. Document management software enables banks to gain a more complete and accurate view of the  client and customer activity. That means more robust, timely reporting by downstream systems, and fewer exceptions. 

Technologies & Tools

  • NodeJS, NodeJS SDK
  • NestJs
  • Angular 6
  • Mysql
  • Hyperledger Fabric
  • CouchDB
  • Hyperledger Fabric 
     

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Softjourn is a global technology services provider that finds custom solutions for our clients’ toughest challenges. We leverage our domain expertise in Fintech, Cards & Payments, and Media & Entertainment (with a special emphasis on ticketing), to apply new technology that brings our clients' growing needs to life. Contact us to discuss how we can make your idea a reality!