Quality assurance in software development is one of the key processes in any organization, where Information Technology systems impact the realization of business processes significantly. For digitalization and informatization of business processes, organizations need to have a clear notion of their processes, which can be achieved by focusing on the evaluation, optimization, and continuous improvement of business processes, in addition to supporting software quality. The research addresses the problems of the financial business sector. More specifically, the frequently performed loan approval process and its existing information solution support. Reports have been made about existing risks, unexpected fallouts, resources wasted in the loan approval process and lack of quality information support. Therefore, the research focuses primarily on the possibilities to optimize the business process by analyzing and evaluating the process activities (measuring the quality of existing software, introducing new information system support and risk management solutions, as well as identification of optimization potentials, where possible). The current state is modeled, simulated, and evaluated(according to a literature review and interview results). Finally, the possibilities of optimization are proposed, and the potential effect on the quality of the loan approval process.
Measuring the quality of processes and their supporting software, as well as the constant process of optimization, are important elements of every business organization`s success, keeping its processes free of waste, optimizing time and cost, as well as achieving optimal values of different Key Performance parameters or Indicators (known as KPIs). Since businesses rely on Information Solution (IS) support, it is important to provide qualitative solutions that fit the user’s expectations, are well accepted and provide a positive user experience. In addition, management and quality assurance of processes is a growing issue in companies that rely on several (often unconnected) IS, and the modeling approach affects the understanding of the IS role and supports quality assessment of IS based process. In addition to the growth of users and their demands, there is also an escalation of providers producing several challengers among Information Technology (IT) companies and their processes. Growing numbers (of devices, solutions as well as users), result in several unconnected solutions, causing complex integration of products, introducing chaos, uncertainty and risk in users’ (digital) lives.
Due to the importance and actuality of the subject, even more so in the past years since the
economy suffered, efforts are dedicated to managing and anticipating risks. The importance of
measuring several quality aspects (quality of business processes, based on IS), is also increasing.
Reportedly, expected risks can be detected in a timely manner, and managed only by a systematic
approach. Even more so in the present day, banks carry out various risk management activities and
processes before decisions are being made (loans are issued, for example) performed manually, or
supported by software solutions. As part of risk management, banking institutions reportedly use
several approaches, some of them automated, however, not all, and there is potential for
improvements. Information support includes different methods, most of them from the field of
Operational Research, such as stochastic processes for determining risks, prices, guarantees, and
delays` evaluation
With the increase of Information Technology (hereinafter, IT) support and possibilities electronic
banking provides, the majority of business processes are being redesigned and re-planned, with the
inclusion of greater informatization and automation
The paper is organized into five sections. Definitions of business process optimization and different optimization approaches are presented in Section 2, while the preliminary research is described in Section 3. Section 4 presents the case study of the optimization of the loan approval process, including a general description of the process, as well as the simulation of the loan approval process with different optimization approaches. The last, Section 5, includes a summary of results and the conclusion, followed by listed literature.
A business process is defined as a collective set of tasks that, when connected and sequenced
properly, perform a business operation
Primarily, there are several known approaches to process optimization, respectively, transformation
of a process
Simulation 26%
Voice of customer 3%
Modeling
34% KPI identification 14%
Process success measuring 3%
Revision
5% Ishikawa diagram [ODSTOTEK] 5 why method 6%
Similar findings are also presented in an extended research (Čuček 2018), where a supplementary
survey about optimization methods use was performed among IT companies, and coincides with
similar research results in
Simulation is the process of creating and analyzing a digital prototype of a physical model to predict
its performance in the real world. Simulation modeling is used to help designers and engineers
understand whether and under what conditions a process could fail and what loads it can withstand.
The act of simulating a complex system needs the support of an IT solution, such as Signavio,
Enterprise Architect, or others.
Ishikawa diagrams were popularized in the 1960s by Kaoru Ishikawa, who pioneered quality management processes in the Kawasaki shipyards, and, in the process, became one of the founding fathers of modern management. The Ishikawa diagram (also known as fishbone diagrams, herringbone diagrams, cause-and-effect diagrams, or Fishikawa) is a tool used for identifying and presenting all possible causes of a particular problem in graphical format systematically. Usually, it can be made using the following steps: (1) Identify the problem (2) Work out the major factors involved (8M): People or Man power – causes, caused by people Methods - causes caused by rules, regulation, legislation or standards Machines – causes, caused by equipment such as machinery, computers, tolls Materials – causes, caused by a defect or material properties Measurements – causes, caused by improper or poorly chosen measurement Environment (Mother nature) – causes, caused by the environment - temperature, humidity or the culture Management – causes, caused by improper management Maintenance – causes, caused by improper maintenance (3) Identify possible causes, and (4) Analyse the diagram.
Despite the lower grade of the technique when performing the survey in Table 1, the Ishikawa diagram was, nevertheless, chosen due to its graphical presentation and clarity of potential problems. Fig. 2 illustrates the general structure of the Ishikawa diagram.
The preliminary research was carried out with an interview and survey targeting banks and financial institutions. Most banks declined the received collaboration request. Therefore, the difficulty of gaining data was evident. Due to the very poor responsiveness, the interview was conducted with two employees from one bank (one in person, one through e-mails).
The summary of questions and answers is presented in Table 2 (both interviewees` answers were the same). To point out question 3 (Q3), the inquiry was focused on which activities are computerized in the bank (e.g., informative calculation of loan, calculation of the interest rate and repayment period, financial verification of the client, deciding on the suitability of the loan applicant, digital signature of the contract and other). The results indicated that, despite some computerized activities, not all are completely automated, and there is a lot of human effort necessary. The results show that the loan approval process is partly automated; however, no optimization methods are used for evaluating or approving loans.
Based on the received information, the problem of non-optimized activities was recognized in the loan approval process. To investigate potential possibilities to create change, general examples of the loan approval process are presented in the following sections, in addition to a conducted case study.
Based on the identified setbacks of banks’ loan approval processes, a case study investigating the process’ possibilities was performed in the following Section.
The business process of loan approval is an integral part of a bank or institution. Each business
process also includes a certain level of risk associated with credit scoring. Based on a literature
review, the bank distinguishes between two groups of credit: Approval and rejection of a loan, which
involves a risk assessment process. Before the loan granting, banks verify the individual user who
would like to take out a loan (verification in Slovenia is carried out using the SISBON information
system
Once a loan is approved by a bank, an agreement between the bank and a customer is set, under
terms which vary among banks, as well as countries. Credit risk is the possibility that money will
not be returned, resulting in a financial loss. Credit risk from the point of view of a banking
institution is the risk that the claim will not be settled within the specified time limits or under
certain conditions by the debtor. There are several different types of credit risk, which are presented
below
Different KPI’s were identified based on the risks (Table 3). The listed risks are a part of the “Evaluation of the credit loaner” activity in Fig. 3. In addition to risk evaluation, there are also KPIs, that are critical to the current and future success of the loan approval business process.
In our case study, most of the KPI’s cannot be simulated, nor did we receive sufficient information from the banks. However, basic time and cost constraints can, nevertheless, be included. Regarding the time constraint, we overviewed some possible wastes as well, connected mainly to excessive waiting (for documentation, approval or other non-optimized respectively non-automated activities).
KPI2 KPI3
Number of contracts/NO KPI4
Costs/YES KPI5
Time consumed/YES
Included in all activities, performed by the bank. KPI is focused on the speed of how quickly the bank succeeds in checking the conditions for granting a loan. Set to the "Evaluation of the credit loaner" activity. KPI represents the number of clients classified according to their creditworthiness. An indicator connected to the creditworthiness of a client is the actual percentage of clients who paid their credits successfully.
An indicator of success representing how many contracts were set, which enables measuring the quality of the services to the process.
Process costs are built into the Signavio online environment to measure the costs within the process of granting credits.
Built into the Signavio web environment, enabling measuring of the time spent from loan request to loan approval. The tool allows you to measure the time in the credit approval process.
In Fig. 3, a generalized credit approval model is presented, modeled using the BPMN notation in the Signavio web tool. The process contains two main roles: The bank and the customer/potential loaner. The process begins with the activity of selecting a client's bank, then the bank presents its information on loans, on the basis of which the customer decides to apply for a loan. When the bank accepts the application, it begins checking the data based on the documentation provided by the customer, and through the SISBON information system. After verifying the results and credit assessment, the bank prepares a Contract. The client signs the Contract. The signed Contract becomes valid, and the bank transfers funds to the client's account. The transfer of funds ends the process. The model and simulation of the process are presented in Fig. 3.
The process analysis was carried out using the Signavio online tool. Through the web tool, we
entered the information costs on the activities, or the number of costs that a given activity has.
Information was obtained with the help of literature
To simulate the process with several instances, we observed the queue theory, a study of waiting
lines in order to predict the length and waiting time
The TO-BE model is a proposition of the AS-IS model optimization, indicating the activities that need additional support (through automation or human interaction) to improve KPIs (especially time-related indicators). A business process transformation can be carried out in several ways. Some simple solutions (digitalization, for example), are already implemented within most banks; the renovation can also be carried out using methods based on the design of the product. The key factors are influenced by the restructuring of the business process: Time, quality, costs, flexibility. Only time and cost were evaluated through simulation,.
The TO-BE model has to improve at least one of the factors
Fig. 5. The TO-BE model
The activities that were proposed during the renovation are presented in Fig. 5. Activities with no added value, such as printing a credit agreement or handwritten signature, are replaced with informatization where possible. The changes in the model are shown with a different color of activities. Due to several non-automated activities, the simulation of the AS-IS process produced several bottlenecks, omitted in the TO-BE process. The comparison of the bottlenecks is presented in Table 4.
Not all bottlenecks were solved, and some new ones accumulated due to the rearrangement. However, the sum of all bottlenecks has, nevertheless, decreased (Table 4). Table 5 presents the improvements of the process renewal; the costs have not changed significantly, however, the time aspect is significantly improved due to the informatization in activities such as Information calculation, Evaluation of the credit loaner and Loan insurance decision.
Process Evaluation and Improvement: A Case Study of The Loan Approval Process • 13:11 AS-IS TO-BE
The optimization technology has enabled modeling, partial integration of success indicators, simulation of the business process, and business process comparison between AS-IS and TO-BE conditions. The TO-BE process is less time-consuming and more efficient. After the analysis, we concluded that IT solutions could improve the business process characteristics. It is sensible to include additional risk management in the process of approval, as well as evaluate the quality of software solutions.
Despite relatively affirmative results, there are several risks to the validity of the research. An interview was conducted at one bank with two people, and the survey of optimization approaches and simulation was run within IT companies and not banks. Therefore, the results are challenging to be generalized, with its answers, to other banks in Slovenia.
The loan approval process is one of the more sensitive areas of banking and the Finance sector. Due to the pursuit to create efficient processes and achieve an optimized resource consumption regardless of a domain, the search for a qualitative product application is becoming vital. Measuring quality of software can, additionally, be extended to measuring the quality of processes, assuming that the process model is a prerequisite for the real process and the process execution relies on IS. In addition to economic and mathematical knowledge, appropriate IT solution support needs to be applied, including information security, transfer of business processes into digital form with the purpose of measuring and evaluating with the help of computer programs, application of mathematical methods to activities in the process, replacement of manual operations with new ways of electronic business, and introduction of e-banking among the widest possible target audience.
As a proposal for optimization, using advanced IT support can optimize the credit approval
process to some extent. However, traditional systems like banks are less prone to change, and use
few of the available possibilities. Within the research, some potentially replaceable activities were
highlighted where IT could be included. To support defined ideas, a survey was made among
employees from IT companies evaluating different optimization approaches (Čuček 2018)
Within the paper, we evaluated the high level loan approval process, and presented some possible methods and approaches to optimization. Supporting IT solutions, as well as additional methods, can play an important part in improving every business process, as long as it is acknowledged that improvements can be made and would benefit end-users, as well as employees. Since the paper presents an initial acquaintance with one of many processes (from the Information Solution support point of view), the future work will expand the analysis and comparison of a further set of processes. Future work will include an expansion of the survey, respectively, interviews, covering other non-ITdomains in smart cities, comparing the optimization level of different business processes, and evaluating motivation to change and improve processes within different domains, supported by digitalization and informatization. Among the process optimization approaches presented in Section 2, the use of operational research for smart(er) decision-making within IT solutions was often mentioned, which will be the subject of future research and, therefore, included among the opportunities for process optimization and process quality growth.
The authors acknowledge the financial support from the Slovenian Research Agency (Research Core Funding No. P2-0057).