The financial institutions are now rapidly shifting its strategic focus to customer retention and satisfaction by prioritizing meeting customer expectations, demands, convenience and timely service.The loan process is cumbersome and paper-intensive, often taking longer time than anticipated, however, increasing the use of digital automation systems has become a breakthrough in making it easier, faster and more customer centric.
Financial Institutions must take advantage of modern digital systems to differentiate themselves and have an edge over their competitors. A system that automates and manages the loan application and assists the financial institutions with their disbursement process is called a Loan Origination System (LOS).
The loan software implementation may undertake managing all steps of the loan process; from prequalification to approval of the financing limits.
LOS is designed to meet banks’ demand for different types of credit; including mortgage loans, consumer credit, trade credit, corporate, commercial and SME loan applications; such a system contributes to significant cost savings and enhances the loan application process by making it easier and convenient for the customer as well as banks staff. In addition, a centralized system provides a detailed view of your customers, driving upsell/cross-sell opportunities and driving customer satisfaction and retention.
The lending system is data-driven and has analytics capabilities that provide banks with key insights into their lending decisions. Through comprehensive financial statement analysis, multiple risk rating auto calculative modules (i.e. ORR, FRR, ERR and Group Ratings), review of other necessary information, LOS enables effective and efficient credit risk management process.
Configurable financial metrics, peer group comparisons, forecasting, and other features help the financial institution in successfully assessing risk that it may face during the tenor of the loan application.
Banks need well-designed integration strategies that expedite the lending process, facilitate lending automation, and improve consumer convenience.
What we know already – Problem Diagnosis:
Today’s commercial lending market has many software applications that meet the lending and credit check requirements of both traditional and non-traditional lenders. Financial institutions are increasingly looking to improve their practices in these areas to increase efficiency, speed of decision-making, productivity and improve the customer experience.
This article outlines the challenges of traditional lending practices and examines each stage of the lending process to see how automation can improve and standardize the underwriting process.
Digital Loan Origination:
Credit markets around the world are undergoing a paradigm shift towards digitization. A new category of digital lenders has emerged that uses the latest technology to make everyday life easier and smoother for consumers.
The credit landscape has changed dramatically over the last decade. To meet evolving consumer demands, the industry has transformed the entire lending process which includes faster, more stable and streamlined lending to customers. The major factors that have led to the rapid growth of digital renders are the growing number of tech-savvy users, increasing digital connectivity, and increasing innovation especially due to the pandemic situation being faced world-wide.
For lenders consumer underwriting has traditionally been a time-consuming and complex process, requiring manual underwriting and documentation. As digital renders are equipped with automation & latest technology, this process is also emerging with the shift from manual to digital lending as they have become faster, smarter and more convenient for borrowers as well as lenders.
Faster TAT (Turnaround Time) – In today’s world, it is extremely important for consumers to have a fast and efficient loan application process. Traditionally, lenders had to go through a much hassled manual review process that typically takes several business days to complete. Equipped with innovative technology, fintech companies can do the entire verification process digitally via eKYC, Video-KYC, eSigning, etc., reducing processing time by a significant factor.
Without intelligent and intuitive digital lending process systems; banks cannot survive in a socially segregated society. The lending cycle you choose has a direct impact on your borrowers, their ratings, underwriting, terms and, in turn, your bank’s performance.
Borrowers in today’s digital lending world want money when they want it, where they want it, and how they want it. At the same time, establishing the optimal digital lending process for borrowers from the ground up can be a daunting task, especially as banks need to be vigilant regarding bad debts and questionable loan applicants.
Step 1: Choosing the right Loan Origination System:
Credit markets around the world are undergoing a paradigm shift towards digitization. A new category of digital lenders has emerged that uses the latest technology to make everyday life easier and smoother for consumers.
The credit landscape has changed dramatically over the last decade. To meet evolving consumer demands, the industry has transformed the entire lending process which includes faster, more stable and streamlined lending to customers. The major factors that have led to the rapid growth of digital renders are the growing number of tech-savvy users, increasing digital connectivity, and increasing innovation especially due to the pandemic situation being faced world-wide.
For lenders consumer underwriting has traditionally been a time-consuming and complex process, requiring manual underwriting and documentation. As digital renders are equipped with automation & latest technology, this process is also emerging with the shift from manual to digital lending as they have become faster, smarter and more convenient for borrowers as well as lenders.
Faster TAT (Turnaround Time) – In today’s world, it is extremely important for consumers to have a fast and efficient loan application process. Traditionally, lenders had to go through a much hassled manual review process that typically takes several business days to complete. Equipped with innovative technology, fintech companies can do the entire verification process digitally via eKYC, Video-KYC, eSigning, etc., reducing processing time by a significant factor.
Without intelligent and intuitive digital lending process systems; banks cannot survive in a socially segregated society. The lending cycle you choose has a direct impact on your borrowers, their ratings, underwriting, terms and, in turn, your bank’s performance.
Borrowers in today’s digital lending world want money when they want it, where they want it, and how they want it. At the same time, establishing the optimal digital lending process for borrowers from the ground up can be a daunting task, especially as banks need to be vigilant regarding bad debts and questionable loan applicants.
Step 2: Loan Origination Process Review:
After completing your research and choosing the best suited lending system, you’ll find that you have a very good idea of the lending process you can use based on its features.It’s time to put everything down on paper and consider your business needs, borrower preferences, threats, and your unique selling proposition.
Not to mention the formation process of local competitors and top performers in foreign markets; because in today’s global world, the technology available to one organization can almost certainly be replicated and built by another, no matter where you work.
Business models and rationale are key, but talking to local regulatory experts is imperative to have an insight inside and outside regulatory standards and avoid regulatory landmines.
Once steps are in place from a compliance standpoint, involve your team and double check your chosen system. A hands-on originator can provide details that are often overlooked, leading to more informed decisions, so we want people at different stages of the lending process to participate in the discussion and customize the chosen solution as it best suits the financial institution needs.
Shift to digital loan origination process:
Automating paper-based loan applications is an easy achievement. Implementing an online portal to collect consumer information, request paperwork, and perform basic KYC will allow you to:
- Ensure digital customer login and remote onboarding process
- reduce mistakes and lost documents
- Reduce manual work & stress for the operating team.
Conclusion:
Good borrowers are less likely to come back if they miss their lending targets, but the poor flock. Time and resources are spent on credit scoring, automation, verification, and integration. However, with today’s technology, software does all the heavy lifting.
In the current uncertain global economy, financial institutions have a limited view of the financial sustainability of their customers. On the other hand, manual underwriting techniques are more likely to harm than improve a financial institution’s ability to weather the current credit crisis.
Digital sourcing, data-driven processes, and proper use of technology have reduced human intervention and made processes more accurate. Not only has digital lending helped remove the limitations of the underwriting process, but it has added a new dimension that serves the primary goal of making credit available to those who need it. With advancements, digital lenders are sure to change the face of lending in the years to come.