How is Technology Enhancing Lending Efficiency?

Banking CIO Outlook | Thursday, September 12, 2019

Digitalizing lending information and workflow bolster efficiency and lower bottlenecks, driving bankers towards quality and transparency. 

FERMONT, CA: The transformation of bank operations and core platforms has been palpable over the past decade, providing the foundation for the banking and financial services industry. The economic downturn that sparked newly enforced regulations caused banks to shift their focus from making strategic investments to compliance adherence and reporting tactical investments. Now that the economic landscape is entering a new realm of future development and competition continues to grow with financial technology firms coming to the forefront, banks of all sizes hone their value proposition, supplied to their customers.  Leading banks embrace the revolution in digital lending, bringing down "time to yes" to five minutes, and cash time to less than 24 hours. Credit is at the core of most customer relationships and digitizing it offers both banks and customers significant advantages.

Digitization becomes the norm for processes of retail lending. Applications for a personal loan can now be submitted on mobile phone with a few swipes, and time to cash can be as short as a couple of minutes. Overall, giant leaps are changing the finance market. New players are entering the market with aggregators and comparison portals, thus turning loans into products with increased transparency. Also, new regulatory guidelines enhance competition among banks and enable specialized service providers to push into the banks' value chain. Here are a few principles that banks use to create potential outcomes with digital lending and transform their organizations.

Rearchitecting Lending Proceedings

The need for a revolution in the lending process requires full digitalization and comprehensive automation. Digital channels meet the demand for convenience and ongoing availability of customers. At the same time, they offer new growth opportunities to banks. Digital channels meet the need for clients' comfort and continuous accessibility. They provide banks with fresh possibilities for development as well. Digital paperless processes enable effective processing. Automated processing is possible with standardized process steps or process chains. The entire lending business also remains highly regulated, however, and is subject to various regulatory and legal requirements. Interestingly, the new revolutionary technical possibilities also provide the impetus for expanding or adjusting this legal framework.

Consumer Centric-Approach

The rise of digitalization has given way to online lending software. These platforms are constructed with a consumer-centric approach. Consumers can register and begin applying for loans on the platform. Debtors can easily submit records, verify their own credit scores, and also monitor the status of loans with a loan management scheme. In essence, the digital lending platform automates the process and ensures borrowers' adherence. The digital lending platform monitors and encourages borrowers to submit required documents and track credit processing times quickly.

Analytics in Digitalizing Data

One of the limitations in the lending system is that between lenders and underwriters or analysts, calculations and analysis can vary. This can result in unreliable estimates, credit, and reporting choices. A digital lending solution, particularly the one integrated into a digital banking platform, can more rapidly evaluate, decide, and price each loan. At the same time, once the digital lending data is generated, the banks and credit unions can better utilize those data insights which help them better understand portfolio risk and create strategic choices.

Customer Experience

The leaders of the finance industry are prompt to understand the demands of their customers. Consumers are looking to work with ease and comfort. The best financial institutions are keen to leverage digital solutions to improve their customer experience and provide them with the best solutions.

Ultimately, digitalizing lending increases the experience of the client or member in various respects by accelerating the process and growing transparency. It also makes the financial institution more productive, which can translate into better earnings or more resources for service improvement or charges and tariffs. Lastly, digital lending provides financial institutions the capacity to continue to develop their portfolios without adding or rising personnel levels. 

See Also: Financial Services Review

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