5 Ways Banks & Credit Unions Can Digitally Transform Loan Origination

In the Rocket Mortgage and fintech era, traditional lenders face unprecedented challenges to meeting expectations of borrowers for speed and an efficient, seamless experience. No one can transform overnight. But even taking one of five key steps will make a difference.

Nobody wants to become the next Blockbuster or Kodak. As a result legacy businesses in all sectors, banking very specifically included, are being forced to digitally transform to keep up.

That said, digital transformation is easier said than done, especially in the specialized area of loan origination. Transformation requires consumer and small business lenders to not only adopt new technology, but incorporate it into multiple facets of its everyday operations. That means frequently and rigorously evaluating the effects new tools are having on the customer experience. The more improved the experience, the greater its impact on a company’s bottom line. But technology of itself does not guarantee an improved experience.

A key step in an institution’s digital transformation is identifying which aspects of the business to transform and how. There are five specific practices that financial institutions should implement in order to meet their customers’ evolving expectations.

1. Develop a Holistic, Company-Wide Approach to Consumer Information

For customers of financial institutions, nothing screams “you’re not important” more than being asked to provide their address to the bank that helped them secure a mortgage loan in the first place. Once the institution has a consumer’s information on file (with their permission, of course), it should be accessible throughout the organization.

For example, one leading Canadian bank has reduced its online loan application process by 60% simply by connecting it to internal customer data sources. The result: Consumers can complete the application process in seconds, rather than being forced to submit page after page of information.

Connecting legacy systems can be a messy, expensive venture, but the benefits of implementing a holistic customer information system across the entire organization can be well worth it.

2. Exercise Speed and Efficiency

Today’s customers live in an instant world. They expect content and experiences to be delivered anywhere, at any time, on any device — an expectation that’s transcended the digital world and left them expecting instant, personalized service across all channels.

To meet these expectations, banks and credit unions must deliver an outstanding experience to not only every customer, but each and every applicant. That’s why the industry’s leaders are increasingly relying on intelligent automation to streamline their origination process, reducing their manual underwriting rates while still demonstrating full compliance with regulations.

For example, Kabbage, the online lender, not only provides 95% of all applicants with a completely automated experience, but enables borrowers to create accounts in less time than it takes some competitors to make a lending decision.

3. Engage Digitally

Whether it’s ordering pizza or buying concert tickets, customers want the services they purchase confirmed in some way — a demand that’s even more important in the financial services arena. That’s why many mortgage lenders are stepping up their engagement efforts throughout the origination and onboarding process, using automated communication tools that proactively update applicants on the status of their requests, enlist their help when necessary, and welcome them as new customers.

Once they have opted in, these tools can be used to engage customers throughout their journey with the financial institution, whether it’s alerts for offers they qualify for or reminders for payments.

One leading retail finance organization was able to automatically contact 65% of the people who had been approved for credit services but had not used them, leaving their staff free to help consumers who needed human assistance.

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4. Use Analytics to Streamline Offers

Auto dealerships aren’t exactly known for inducing trust, engagement, or delight in a high percentage of their visitors. This is why some of the more progressive auto lenders are using prescriptive analytics tools to evaluate a range of potential offers in milliseconds and identify which are most likely to convert consumers into customers.

Financial institutions have access to the same tools, which can maximize target performance metrics while adhering to organizational constraints. The result: more flexible offers for consumers and more conversions for the bank or credit union, without compromising risk or compliance standards.

Financial service providers nervous about the idea of fully automating this alternative loan structure, can simply send the offers generated to a human underwriter, who then selects the deals they feel most comfortable with.

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5. Optimize Your Risk Assessment Process

Accurately assessing a loan applicant’s risk — and pricing that risk appropriately — is difficult enough in steady market conditions without worrying about what happens if the economy changes course and your institution can’t adapt quickly enough — or worse, is aware of the changes needed but is months away from implementing them.

Bank and credit union consumer lenders are now beginning to use a mixture of machine learning and structured scorecards to continuously identify new risk segmentation strategies and adopt the best they find in a controlled and transparent manner.

Meanwhile, financial institutions that deal with high-risk borrowers can take advantage of prescriptive analytics to evaluate every potential price point and identify which terms will maximize target performance metrics without compromising organizational constraints.

Keep in mind that these five steps are guidelines, and many institutions will only find themselves able to implement one at a time. But whether individually or all at once, if these practices are digitized well, the financial institution incorporating them into its loan origination process will find itself more than capable of meeting — and exceeding —customer expectations.

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