As bankers continue to redefine and refocus their strategies for competitive advantage, ownership of the customer, time-to-market, and potential for increasing share of wallet grow in importance while the investment in back-office processing infrastructure is viewed as a less significant differentiating factor by the market. With pressures to keep operating costs down, more and more banks are turning to outsourcing as an alternative to in-house investment in systems, staff, management control, and reporting, as well as associated upgrades, conversions, and retraining in an environment of accelerated change.

AFS is pleased to offer its clients two alternatives: a traditional licensing arrangement (AFSSolution) and an Application Service Provider (ASP) capability (AFSCommerce). Both options afford access to the most feature-rich system in the industry. In evaluating the optimal configuration for your institution, here are some thoughts for consideration that have come out of this assessment at other institutions.

The ASP Advantage with AFS

The regulatory agencies have realized the benefits that an ASP delivery brings to banking institutions, citing their consistent approaches and risk mitigation techniques. The Office of the Comptroller of the Currency (OCC), for example, stated in a 2001 banking bulletin that third-party relationships can offer banks a variety of legitimate and safe opportunities to improve financial performance and gain a competitive edge.

AFSCommerce offers the only straight-through processing loan delivery and management system in the world, resulting in an approach that:

	Mitigates Transaction Risk: According to the OCC, transaction risk results when third-parties offer products and services that fall outside the bank's systems, customer demands, and strategic objectives. AFS is uniquely focused on the business of banking. AFSCommerce ensures a fit with the bank's specific needs, as it is provided only after a full examination of inter-related bank systems, customer demands, and strategic objectives.
	Mitigates Credit Risk: Third-party service providers represent credit risk to their bank clients when the relationship proceeds unmonitored, to the point that the third party originates certain types of loans without sufficient bank management due diligence. AFS guards against this risk by building a bank's unique credit policy and operating procedures into the origination process, monitored and controlled on an automated basis. Superior management reporting focuses on credit policy and pricing exceptions, portfolio risk elements, at-risk loans and relationships, and staff accountability for credit decisions.
	Mitigates Operational Risk: Only AFS, with its straight-through loan delivery process, tracks a loan from application through decisioning, completion of documentation and collateral, booking, servicing, collection, and recovery. The ability to monitor a loan's status at any point in the process, to identify exceptions to bank policy and procedures, to monitor staff productivity and turnaround, to establish and document accountability for everyone who has touched a loan, and to provide meaningful management reporting sets AFSCommerce apart. In-house solutions, because of system interconnectivity required to achieve total oversight, lack the integrated control functionality required to manage operational risk effectively.
	Processes All Loans on a Single System: AFSCommerce provides the ability to process any type of loan on a single system—consumer, business banking, commercial, specialized assets (Commercial Real Estate, Dealer Flooring, Asset-Based), as well as syndicated or securitized assets. At most banks, AFSCommerce eliminates the need to purchase, implement, maintain, support, and update multiple systems, reducing costs by up to 40%. Automation and efficiency improvements result in significant line, operations, and technology staff savings.
	Increases Revenue: AFSCommerce provides the ability to assess a wide variety of fees with great flexibility. In addition, the system monitors their application on a consistent basis and reports on pricing exceptions, resulting in increased fee revenue and reduced revenue leakage—typically a 7-10 basis point gain on the portfolio.
	Minimizes Capital Expenditure: AFSCommerce is accretive to earnings through its cost reduction and revenue enhancement capacity. Clients have access to the country's premier lending system without investment in technical infrastructure, software, and support staff. Bank capital is available to support asset growth or other key strategic initiatives.
	Is Fast to Market: By leveraging AFS' resources and expertise, banks can have AFSCommerce up and running in under three months, as opposed to years of conversion time and systems testing required to implement in-house.
	Is Scalable: An institution of any size can take advantage of the country's premier lending system to provide a full range of innovative and sophisticated lending capabilities, enabling smaller institutions to compete with the top-tier providers on the same competitive basis. Technology scalability enables AFSCommerce to cost-effectively process banks from $1 billion to over $500 billion in asset size.
	Facilitates Conversion: With the ASP arrangement, AFS takes responsibility for conversion planning, execution, testing, and integration, leaving banks to focus resources on change management, decisioning, and approval processes.
	Eliminates Capacity Concerns: AFSCommerce clients can be assured of having the capacity they need as they grow. Disk space, storage, processing windows, and related requirements are AFS responsibilities.
	Provides Flexibility: The open architecture with which AFSCommerce was designed enables AFS to build and maintain all necessary interfaces, ensuring connectivity to functions that may reside outside the system. This flexibility enables AFSCommerce to remain a vital part of the bank's business model, even as that model evolves and grows.
	Ensures Service Levels: AFSCommerce has met or exceeded Service Level Agreements with all existing clients. Service Level Agreements ensure bank customers receive superior service.
	Keeps Current: AFSCommerce clients have access to the newest releases and upgrades, addressing changes in regulatory requirements, industry developments, and incremental profit opportunities—without needing the technical expertise to deploy.
	Decreases Training Timelines and Costs: With operational support shifted to AFS and increased functional automation, training needs are reduced.
	Transfers Data Security and Business Continuity Management: AFS administers data security and disaster recovery plans on behalf of its AFSCommerce clients.
	Leverages AFS' Expertise: AFS supports its AFSCommerce clients with the intellectual capital of its experienced, top-level professionals. The AFS staff knows more about running its systems than does the staff of any other organization. Further, AFS has worked with 35 of the top 50 banks in the country. This experience brings knowledge of industry best practices that will be applied on behalf of AFSCommerce clients to reduce risk, increase revenue, and reduce costs.
Learn more about AFSCommerce services