Credit Union Central of Canada (Canadian Central), which represents credit unions across the nation other than those in Quebec, will offer the online service to its members, which will be available on an opt-in basis for a connection fee. The service will be hosted by Kitchener, Ont.-based Covarity and organized on a regional level by the provincial Centrals that make up the national organization.
Designed to manage loans for small and medium-sized enterprise customers, the Covarity solution will automate financial statement gathering, credit risk analysis and financial reporting.
Customers can provide financial data directly to their credit unions, which should simplify some of the administrative issues around monthly reporting as well as increase the speed at which reports can be analyzed and acted upon.
“”It’s an opportunity for us to do loans monitoring for all of our commercial accounts. Right now it is basically a manual process. Most of the banks, believe it or not, do most of this tracking manually,”” said Jim Hackett, chief operating officer at Canadian Central.
Report generation is typically a labourious process, said Rod Foster, vice-president marketing and alliances with Covarity, with a long cycle between customers filing statements, possibly months, and lending institutions getting back to them to feedback.
“”Here you’ve got an objective analysis that’s being done within 20 days of the month-end. There’s e-mail notification going out to the borrower (asking for statements), so it’s very transparent between the two organizations,”” he said.
Automating the reporting process acts as an early-warning system. A credit union can spot earlier on in the reporting cycle if a customer is having financial difficulty and counsel that customer accordingly.
“”I guess the trick in the whole application is, where there is an account that looks like it’s potentially going into breach, it highlights all of those accounts within the portfolio. So it’s really focusing in on what we call issue management,”” said Foster.
Hackett stressed that the system is designed mainly to improve relationships and financial reporting for individual customers, but there may be broader applications.
Foster said that the system will allow credit unions to compare customer data across verticals and within geographic areas. Restaurants, for example, are difficult to compare because their business is so closely tied to their location, he said.
“”It’s a pretty different environment that you’re dealing with, so if you can start to drill down and give information for similar-type restaurants in similar-type economies, that has greater value. That’s where we think with our application and the data we’re collecting we’re going to able to produce that for them.””
Covarity initially planned to sell the solution to individual credit unions, but was able to take advantage of economies of scale when Canadian Central became involved. Hackett estimated that more than half of its members will hook up to the Covarity system, although it may not appeal to smaller credit unions with a limited number of business customers.
Foster said that it takes one day to train a lending institution to use the system and about five to 15 days to deploy it, depending on the necessary level of customization.