Building the foundation towards Digital Lending – BenchMatrix

Building the foundation towards Digital Lending

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Building the foundation towards Digital Lending


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:

Fintech companies; especially those that provide lending systems and lending automation solutions are lowering the barriers to enter in the lending industry so before the financial institutions start evaluating new solutions for their lending business, consider how technology can be useful for them.

For example, most banks take up to several business days to review a loan application, assess risk, make a loan decision, either approve or reject the application. This is the Stone Age for modern borrowers accustomed to getting an Uber in minutes. At the same time, by switching to an automated system like digital lending platform, the entire lending process (including payment) can be completed in a more effective and efficient manner enabling the users to track the application process and get the same expedited to provide a convenient customer experience.

A loan origination system that defines digital lending and collects relevant data and analyze it in seconds using proprietary deep neural networks and machine learning algorithms. This significantly reduces the time it takes to complete the build process, eliminates human error, and reduces costs by automating repetitive processes.

Based on our research, key steps in choosing the best lending automation software for your business include careful consideration of the following factors:

  • Define your short-term and long-term business needs and the goals you want to achieve with this new digital system.
  • Consider the benefits of an all-in-one system with a modular design.
  • Weigh cloud-based versus on-premises software to determine which best suits your business.
  • Make sure every item has rich functionality built in. Focus on machine learning and unique credit scoring to aid intelligent automation.
  • Think about how easy it is for your customers to use your product.
  • Find out if the platform has country-specific editions and how easy it is to customize your business logic.
  • Make sure it’s fast to market, easy to deploy and user friendly.
  • Examine the vendor’s track record with companies similar to yours.

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.

Step 3: Configure Loan Oriented Solution:

Time to market customization options depending on the chosen lending solution. Advanced fintech can be deployed in days, but can also get bogged down in complex systems that can take months for you and your team to implement into the lending process.

All you need to do is monitor the quality and completeness of your customizations and to the right software vendor at the proper time. If you are a small to medium-sized merchant, an alternative lender, or looking to provide internal financing, your lending automation needs may be more standard.

You get a scalable and adaptable platform that you can customize to your specific business needs. so you can choose the one that best suits your needs:

  • Loans, acquisitions, debt collection and other modules are all individually adjustable.
  • A ready-to-use packaged solution for end-to-end automation.
  • Enterprise solutions that meet the needs of large organizations while meeting their specific needs.

Prequalification is the first point of interaction between a lender and a potential borrower. Once your digital lending solution has been set up and you have received your leads, you will need to either request personal information required for AML and KYC compliance or analyze your leads’ information.

For the prequalification process to be successful, the loan software must have flexible loan application form options to collect and process the data that really helps you make informed loan decisions.

Aside from convenience, the ability to aggregate, process, analyze, and extract insights from data is a key benefit of loan automation. Big data and AI go hand in hand as self-learning algorithms are required to classify and understand the tangle of data points.

With the advent of big data, lending decisions have become more detailed and accurate, hence the problem is not lack of data for analysis. The hard part is developing a solution that can extract all the necessary insights from this data in seconds. For organizations, digital lending platforms use artificial intelligence to perform risk and borrower assessments. Personalize your credit score card and see your criteria incorporated into your borrower evaluation in seconds. Its patented algorithm analyzes the best-performing apps and modifies the scoring method to make selections even more precise.

A new industrial revolution is in full swing, and companies committed to automation will thrive in the future. The good news is that you don’t need dozens of local locations with rent and employees to start your lending business in the digital age; you can free up manpower and dramatically improve speed and performance.

Start semi-automatically, switch to reviewing only applications, and finally run ad-hoc reviews as needed if you encounter errors I can do it. no longer occurs.

The lender’s goal at this stage of the loan process is to use as few staff as possible, as human resources are unmatched in situations where millions of data points need to be processed quickly.

It is important to remember that each borrower is responsible for quality control with authorities. As such, you need an individual to review your application on a regular basis, but since time to funding is critical, it’s necessary that the process is at least semi-automated.

A good digital loan automation system connects to payment software and automatically transfers money to borrowers once all checks are completed and loan payments are approved. The same is true for debt collection.

A flourishing loan can then practically survive on its own as it helps the borrower pay the scheduled automatic repayments, fees and interest and collect all the data to complete due diligence later. However, it is important that all data and borrower information be prepared, stored securely, and entered into a synchronized reporting system. This helps you meet regulatory requirements, reduce operating costs, identify inefficiencies, and eliminating human error. This requires proper integration of tracking and reporting modules into the lending program.

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.


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.

Written by
Sana Arif Bhatti

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