As COVID-19 has accelerated digital banking trends, many institutions have pivoted toward digital transformation. However, in the digital lending space, slow-moving institutions still face a disadvantage.
The economic downturn and obstacles to in-person channels have changed lending demands. These trends, along with intensified competition and high borrower expectations, make loan origination an essential component of your digital banking strategy.
Before the pandemic, CSI conducted a digital lending trends survey of 107 banks. Of the respondents, around 58% prioritized digital lending to increase market share. Despite this data, adoption hasn’t met the increased rate of demand.
Setting aside recent events, it’s wise to broaden lending capabilities. Outdated technology and inefficient processes hamstring your institution against a shifting economy. And a lackluster or incomplete digital experience may drive customers elsewhere.
The Advantages of Digital Lending
Lending digitalization does more than aid loan processing. According to a recent AITE Matrix Report, digital loan management software benefits to your institution’s growth with:
- Improved User Experience: A variety of companies vie for your customers and brick and mortar banking isn’t for everyone. A configurable lending platform integrated into your existing digital solution empowers customers to apply for needed funds without visiting a branch or turning to another provider.
In addition, omnichannel delivery synchronizes online and offline channels, allowing customers to receive lending services from whichever device they choose. Meeting customers where they are further expands your institution’s appeal.
Digital lending also improves the back-end experience, improving lender responsivity. Creating and distributing a loan or transferring information to the core system no longer requires navigating disparate programs. A digital loan origination system also eases the resolution of account abuse and collection. If you must repeat the loan process, automation does so within seconds.
- Efficiency Gains: Digital lending streamlines the lending process and lending compliance while also providing quick resolutions to requests. And like many aspects of digital banking, automating the process saves time and money.
- Business Intelligence and Analytics: While big banks have leveraged data to gain market share, many community banks have fallen behind. As customer acquisition costs continue to rise, your institution must drive traffic via digital channels. A robust solution with exceptional intelligence and analytics opens opportunities to increase market share and cross-sell to current customers.
Besides marketing and strategic planning, you can use dynamic intelligence dashboards to reverse engineer the digital lending process. In doing so, you can quickly determine whether you can refinance a loan to save a customer money in record time.
- Credit Risk Management: With digital lending, you can immediately feed data from a credit report and assess the five Cs of credit for your customers. This feature facilitates quicker turnaround and more confident decision making.
Matrix-based lending scores may cause concern about overlooking loans or denying important customers. But most digital lending solutions allow institutions to set the decisioning parameters. This allows obvious approvals or denials to process immediately, while others route to you for review.
- Regulatory Compliance: Although compliance concerns often discourage adoption, digital lending can strengthen your efforts. Digital lending makes data accessible, rendering manual searches for documentation unnecessary and decreasing the risk of human error.
Digital lending platforms also provide a complete audit trail for regulatory review, and automation creates a more consistent compliance environment.
Automation Doesn’t Have to Mean Automated Decisioning
Your institution sets itself apart by providing a human element to the industry. You know your customers, so digital lending may seem like giving up authority or sacrificing that human element.
But that doesn’t have to be the case. The trick is to relinquish the right type of control for your institution and use these tools to inform decisioning. Digital lending automates tasks that were once manual but should not be mistaken for automating the decisioning process.
However, automating decisioning can yield favorable results. For instance, if your institution has a conservative lending policy, a properly configured digital lending system maintains tight controls and ensures nothing slips through the cracks. Similarly, if your institution is an early adopter of or is highly specialized in a particular type of credit, automation will drastically streamline the process.
Reinventing the Loan Origination Process
Institutions that wish to stay relevant must embrace digital technologies. But the shift may alter workflows and require acceptance of some level of automation. From upfront costs to preexisting vendors, digital lending adoption presents some challenges.
You can offset these concerns by embracing automated loan origination tools with the right digital lending strategy for your bank. Altogether, you’ll provide your customers with the service they need and improve your own processes.
Check out this webinar to see how a digital loan origination solution reinvents the loan origination system for the better.
Simon Fisher joined CSI in August of 2020 to expand CSI’s digital lending strategy. Prior to joining CSI, Simon worked as a consultant helping banks around the US conduct core evaluations. Simon has a fundamental understanding of industry trends by evaluating multiple platforms. During his career, Simon has worked many different lending roles for a community bank during his 10-year term, including retail, commercial and mortgage loans. Simon understands the complexity of different loan types and is working to deliver the best digital experience for loan officers as well as borrowers.