AI is changing the game for all the industries that impact human lives with explosive technology. Digital transformation is not limited to simple tasks but is evolving to even execute complex problems with extreme speed, accuracy, and efficiency.
Financial intermediaries like banks and lending institutions are looking to move away from legacy and aging platforms that are cumbersome and lack the functionality to expedite lending processes. As lenders move away from the established CRMs and databases to empower their lending business with digital solutions it is imperative to learn more about lending software. Phasing out technology and embracing a new one is a capital-intensive exercise and requires to be executed after understanding how to implement this change.
Before moving on to complete digitization businesses should take care of a few modalities that will help in the seamless transition from the heretofore system to the new age of automated lending. Here are a few aspects that need to be covered before any transition that changes the order of things but does not disrupt the workflow: –
Simple integration and ease of implementation
CRM-based databases have existed in the banking industry for over two decades and a large number of the current workforce in any bank have been trained to work in this set-up. The biggest laggard of a CRM system is that it holds less than twenty percent of essential data that is required for strategic decision-making. The information is scattered and in silos. Retrieving this data to finish a task is done essentially through emails and importing of data from spreadsheets. This task is time-consuming, inefficient and even poses a higher risk for data protection.
A digital loan origination software eliminates the barriers to efficiency and must integrate functions on an end-to-end basis. A friend office bank executive can retrieve data from backend credit analysts and loan officers without emailing them. This kind of integration will map the point of sale or POS software, lending business CRM database, front-end, back-end, and customer interfaces like website, mobile app, and other service channels into a single unified system that sources one truth for data. There is no need to email or import data from any source or file.
The transition from CRM database to digital banking does not mean overhauling to a point that workflow is disrupted. Banking functions cannot afford even a single day of downtime in their functions. It causes systemic havoc if banks stop functioning even for a single day. On this account, the ease of implementation of digital solutions needs to be as simple, smooth, and orderly as possible without too many hiccups.
Truly customer-centric experience
There was a time when people loved driving to a bank and meeting their friendly relationship managers who handled their bank accounts, loans, and investments and offered the ear of a trusted friend. We can term this experience as nostalgia as Gen-Z prefers using the technology to their advantage and not expend time on something that can be done from the different digital channels of service.
Banks looking to upgrade to a LOS need to establish their abilities to integrate different digital channels of banking platforms with unified databases. A LOS with smart features enables borrowers to upload their financial data. With help of neural networking and API integration, the data is vetted for authenticity. Any software that falls short of this ability to help a customer upload their data and wait only for a short period to wait for loan approval results, is not fully automated.
Digitally-savvy loan consumers appreciate the efficiency of a machine over an in-person bank officer if that saves their time. Data automation also is transparent and cites the reason if a loan is not approved. Thus, an applicant can review his shortcomings and overcome them before applying for a loan again, thereby translating an ineligible application into an eligible one.
The LOS also reviews the loans on a real-time basis even after disbursal and initiates reminders and prompts to pay the installment in time. This type of encouragement is well received and appreciated by customers and often translates into repeat business.
The clauses of a loan agreement are exhaustive. Likewise, they are in place to protect the bank legally from any unforeseen risks that cannot be mitigated at the stage of loan origination. But for a loan to be an in-principle approval a lot of checks for due diligence have to be carried out.
The purpose of automation is to reduce the time taken to perform the due-diligence tasks while maintaining the standards of protocols to control and manage systemic risk. A LOS has capabilities like data verification through integration, advanced financial analysis, and credit assessment, adherence to the organization’s credit policy, collateral capturing, monitoring and tracking loan payments through review of API data, and alerting portfolio concentration and exposure analysis.
Digitization of the lending process helps in establishing data integrity and helps in differentiating defrauding consumers from genuine borrowers. The regulatory encumbrance post-2008 financial crisis has increased globally when lenders could not quantify their risk exposure. Achieving growth without safeguarding the banking business’s interest will not reflect the reality of any given loan precisely. A good digital LOS enables data integrity completely without leaving anything in the dark.
It is desirable for any bank to onboard as many loan applicants and convert them to borrowers as possible. And a bank that offers a lower rate of interest on a loan may get less business than the one that approves it in the fastest turnaround time. That’s because commercial business needs and requirements are largely dependent on time.
A LOS that can automate the commercial lending process from origination to the end of a loan cycle should be checked for all the features mentioned above. Many tech companies have developed software with varying features. A bank or lender should opt for one that can be customized as per its requirements and personalized with the entity’s branding.