5 Reasons Why Your Lending Operations Need an Urgent Update

The world of lending has been undergoing a sea change ever since automation came into the picture. Lending is no longer limited to banks and NBFCs. More and more small lenders are slowly dotting the lending scene and are competing with banks steadily by offering loans at competitive rates and through well-managed loan origination services. 

The global loan origination software market is set to see a CAGR of 14.7% between 2020 and 2029.

One of the most effective ways of staying ahead of the competition when it comes to lending is to provide loans to underserviced, unbanked tiers, at competitive rates. This can only be possible with the highest degree of tech intervention and adaptation. 

Automation is helping boost efficiency in submitting loan applications, digital verification, quick underwriting, and easy disbursals. AI is dictating the change that the industry is currently witnessing. 

Lenders who have not integrated AI into their lending systems are certainly at a disadvantage when it comes to churning out loans quickly and at competitive rates while giving their customers a delightful borrowing experience along the way. 

In this article, we talk about how AI is changing the lending landscape globally, and the 5 tell-tale signs that should spur an urgent update in your lending processes.

How has AI led to a boom in the lending market?

Lending is a lot about ascertaining the right interest rates and the lending period that serves the interest of both lenders and borrowers. It’s not easy to zero down on numbers based on unknowns and contingencies. Therefore, manual underwriting needs a lot of time and due diligence in assessing the creditworthiness of the borrowers and the rate of interest that would be best suited for each loan application. 

Also, in traditional lending processes, the amount of data available for each application is fairly limited and is subject to bias and errors due to the manual nature of the process. 

With AI and the arrival of Big Data, the decision to accept or reject a loan application did not just depend on the details mentioned in the loan application. Big Data along with AI-powered predictive analytics could now sweep through this data in seconds and find patterns based on historical data that could help underwriters get a much better idea of the kind of risk associated with each application and ascertain a lending rate likewise. 

This also allowed lenders to start providing loans to the previously unbanked population who had no credit history and thus a difficult segment to be loaned to. 

AI, thus, not only boosted efficiency in the lending sector but also allowed them to foray into new markets and possibilities. 

Is it time to upgrade your lending operations?

While banks have proactively integrated fintech and modern loan origination software into their legacy systems, P2P and smaller lenders are establishing their new lending businesses on the foundation of modern loan origination software. 

However, integrating modern loan origination software is not enough. Technology is dynamic. That is why every software has frequent update patches that set them at par with the rest of the technological changes around the world. 

Lenders need to be cognizant of not only these tech changes but also the changes in consumer behavior, i.e., the borrowing behavior of their customers. The two variables put together, give lenders a clearer idea of whether their current loan origination systems are helping them stand out in the competition or making them lag. 

Lenders need to keep asking the following questions to ascertain whether it’s time for an urgent, relatively bigger tech upgrade in their lending processes. 

  • Are we achieving our business goals?

If a lender is unable to convert the loan applications that have been green-lighted in their marketing funnel, then they might have a problem in their marketing and loan origination software integration (e.g., consider a HubSpot integration). 

Third-party integration is one of the key requirements in any good lending software. If loan servicing software for private lenders does not allow for smooth third-party integrations, then they might need to consider an urgent upgrade right away. 

  • Is our software secure from data breaches?

Outdated lending software that has not implemented the latest security patches could be vulnerable to data security threats, breaches, and hacks. Given the amount of confidential data stored in the reserves of lending companies, such a breach could not only affect their business processes but overall reputation, as well. Lenders should always be mindful of implementing modern loan origination software which is compliant with the latest data security regulations and has strong access controls in place. 

  • Is our end consumer unable to reach us when in need?

Consumers these days are used to getting their issues addressed in a matter of minutes, hopefully without enduring annoying IVRs. A good loan origination software should make it easy for customers to reach lenders in case they need to raise a ticket or talk to the lender to sort some issues. A good lending origination software will allow customers to access them irrespective of the device they are using, be it a smartphone, web browser, tablet, or a simple feature phone. Lenders should make sure that their lending software allows customers to reach them through phone, email, messenger, whichever way helps them stay connected, seamlessly.

  • Is our lending software user-friendly?

A good UX/UI is key to success for any software. How easy lenders make it for their end consumers to access information, easy to view workflows and automation that tell them when the next EMI is due, or what stage their application is in the overall process. The easier the lending software makes it for the customers, the greater are their chances of using the lender’s services or referring them to their network. A good UX/UI works well not only for the customers but also for the employees. If lenders discover this one factor missing in their lending origination software, then it might be time for an upgrade. 

  • Are we using alternative scoring to underwrite loan applications?

The best part about using alternative credit scoring to underwrite loan applications is that it brings the unbanked sections of the market into the folds of the lending industry. The unbanked population does not have previous credit scores which makes their application a risky one for traditional banks. However, for modern lenders, using alternative credit scoring as a tool to underwrite applications, have a much better outlook of how feasible it is to loan the amount to them. 

Alternative credit scoring uses machine learning and a deep neural network to study spending patterns and billing histories to find out the creditworthiness of the applicant. As such, applicants who might seem risky to traditional banks might seem less risky to fintech lenders, who have better access to data and AI-powered insights. 


Tech updates are always good. There’s no bad time to upgrade your tech stack. If you are worried about how long it will take to implement the new software and the business that might get affected during the process, do think about the opportunity cost of not using the software that opens gateways to new markets, reduces costs, and boosts efficiency as soon as it is implemented. For every day that such a tech integration is delayed, you are losing customers to your competitors. So, it’s time to ask yourself the questions we posed in this article and find out how quickly you can integrate modern loan origination software into your lending business. 

  • August 12, 2021