One Size Fits All (and Loan Schedules)

Wiki defines ‘One Size Fits All’ as ‘a product that would fit in all instances’. What does this mean in the world of Banking Technology, specifically when it comes to Banking and Loan Schedules. Tempting as the idea sounds, is it even possible?

I have spent some time developing Banking Solutions. One of the problems we have often faced, was coming up with a generic solution for loan schedules (in Lending). Once done supporting one bank, another one comes up with a different variation or flavour that must be accommodated. And then there is Islamic Lending. So, to rephrase my earlier question, can one size really fit all? Can one lending solution serve all banks, incorporating their different flavours of loan schedules?

A few thoughts that went in during the development of loan schedules that we have developed:

• Loan Schedule is not one schedule. Allow it multiple schedules, with each “Schedule” starting with previous one’s end state.
• A Schedule is not just P(rincipal) & I(nterest) components. Allow it define its own components and allow naming them components as the regional preferences (“Interest” <> “Profit”).
• Each Component then needs a calculation method – so define component calculation methods which are capable of calculating each component within each repayment (given the loan & other repayment parameters).
• Each Repayment is then a customized aggregation of each component defining the repayment.

And is that all? From a theoretical stand point – yes. Does it cater to all kinds of repayment types (e.g. EMI, Lump Sum, Stair etc.) or variations (e.g. Bullet, Moratorium etc.) or schedules (e.g. Grace, Mix etc.). Are we still thinking ‘One Size Fits All’?

Having tested in multiple scenarios from Conventional to Islamic lending, I would say – Yes. It works. The caveat being that when we hit a new schedule type we need some coding enhancement. In technical words, the framework fits whereas the solution needs customization.

And from a bank’s point of view. Will this loan schedules framework benefit them, compared to other available solutions? If I were a Bank CTO (responsible for handling budgets as well as marketing new products in time), I would ask the question ‘Will this solution / approach / framework / product (call it what you want to) fit my needs?’ In other words: ‘Can you deliver the changes fast? And will it be cheap?’ And my answer to both would be – yes.

So, there are some things which can fit all sizes (with a little bit of tweaking here and there – like the wrist watch or the helmet). Others just require custom tailoring J