A Four-Step Strategy for Implementing a New Loan Origination System

As time intensive as choosing a loan origination system is, taking the right approach during the implementation process is equally important. Focusing on steps such as testing, and training will help ensure the new system delivers what an institution hoped for.
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Sooner or later, it happens at almost every financial institution — the board and management team realize if the organization is to continue to grow, it must purchase a new loan origination system (LOS).

Picking the system is a time-intensive process, but even after the decision is made, the work is far from over. A successful implementation begins with the project team identifying needs and creating a detailed plan. The project manager must centralize information from the bank or credit union’s 360-degree perspective.

This means not just getting the lending team involved in the planning, but also marketing, IT, compliance, the call center and the branch and operations departments. All key stakeholders need to be involved and aligned to get the implementation of a new LOS over the finish line.

We’ve outlined four essential requirements that banks and credit unions must consider during the implementation process of a new loan origination system. Taking appropriate steps at this critical stage of the process can help banks and credit unions meet their short- and long-term goals for the system upgrade.

1. Objectives, Transparency and Alignment

Hold a kickoff meeting to make sure all objectives are aligned once the team is set. Typical objectives include: improving member and staff experience; maximizing team efficiencies, such as workflows that simplify and organize work processes; increasing loan applications; and improving sustainability for loan growth.

This requires everyone knowing the answer to a key question: Why are we moving to a new platform? Often, not everyone is part of the decision process, so it is essential to get buy-in from everyone on the financial institution’s implementation team. Staff enthusiasm is critical. Explaining why the institution is making the change can minimize potential hurdles later on.

Decide if the institution will roll out loans and new accounts at the same time. Often it is better to do one right after the other, which will make it easier on IT. Doing both at once can present additional stress points that could prolong the implementation process. At smaller banks and credit unions, where people wear multiple hats, bottlenecks may be more likely.

Insist that the LOS provider configure the system specifically for the institution. This is a valuable — if not vital — requirement. Also important is that the platform include an online collaboration tool so everyone involved can clearly see the milestone dates and open issues. Open communication and transparency between provider and client are key. Every person needs to know who is involved and that the timelines fit.

Ensure all the department participants are in agreement with objectives, scope and milestones. Third-party providers the bank or credit union will use also need to be on board. Financial institutions usually handle this step independently, but sometimes the LOS provider may need to assist. It is important for the institution to know if there will be any additional fees involved.

2. Testing and Bandwidth

Testing is a big step, and the bank or credit union needs to take ownership of this phase. In most cases, the provider will be able to offer some ideas as to what issues the financial institution should watch out for. Still, the provider will not be aware of every scenario the institution may be encountering.

To be successful, testing must be aligned from a resource perspective. Testing often involves overtime hours, or is done between a staff member’s regular work during the day. Either way, the bank or credit union team must ensure staff has time to focus on the task.

Start testing sooner rather than later. LOS implementation generally will be more successful if the bank or credit union simply gets started with something rather than holding meeting after meeting to try to make every decision upfront. The agile approach is to rely on proven templates, start with one aspect, and then do iterations going forward. This approach can reduce system implementation time by as much as 50%.

User Acceptance Testing (UAT) allows emulation of the entire application process, including underwriting, funding, document signing and more. The provider will set up the test environment for the financial institution to try.

A provider that has installed numerous systems should have templates that have proven successful in the past. As testing goes forward, the provider should make adjustments for the bank or credit union and should foster two-way sharing of information throughout the implementation process.

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3. Rollout Speed and Strategy

The institution will be using its existing system until the implementation date, so it is essential to know if the rollout will be a fast or slow. This varies depending on the organization’s size and how well it adapts to change. Some banks and credit unions choose to start with implementing the new LOS at just one branch, while others prefer to implement the LOS throughout the organization simultaneously. No one answer fits all scenarios.

An experienced LOS provider will have FAQs and best practices based on previous client implementation experiences. These will ensure that the institution’s experience is on the surest path to completion.

Sometimes, a provider will run into an issue caused by a workaround the financial institution came up with based on the limitations of the previous LOS. This is why it is crucial to continue to hold regular meetings to ensure the new platform is set up in the best way.

4. Training and Ensuring Success

Usually, there is more than one way to accomplish a goal, so an LOS provider must be creative and open with their training. The staff at the bank or credit union needs to understand the system to manage it after it goes live. The provider should teach the team the administration side, including how to build the system. This means going through the changes by having the lending staff do it, rather than doing it for them.

A final best practice, when implementation is almost complete, is to bring in a team of super-users. This team might include one person from each branch who has participated in training and is familiar with all the processes. This team will be very beneficial in ensuring a smooth, successful rollout of the new LOS platform.

Remember: In the contract phase, you don’t know what you don’t know. This is why it’s important to have discovery discussions early on and for the provider to inform the financial institution of the system’s capabilities.

A high-quality platform has vital integrations allowing users to look at data from several systems at once, rather than having to log in separately. Some providers have a box approach, and changes or additional services can bring up an extra fee. A good provider will service the bank or credit union and do what needs to be done and can help you navigate the LOS experience.

As time intensive as picking a loan operating system is, taking the right steps during the implementation process will ensure that your system’s performance not only meets expectations, but delivers on your institution’s short- and long-term goals.

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