Benefits of a Cloud-Based Loan Origination System

Loan origination is one of the most significant services in the financial services industry. It backs both commercial and consumer funding and as such is always under enormous pressure to churn multitudes of applications at a rapid scale.

Traditional banks have always had loan management systems in place. They slowly transitioned their manual processes of documentation, verification, and underwriting to custom legacy software. The fact that tech innovation was always a step ahead meant that their legacy loan management system was lagging in effectiveness and efficiency. Maintenance of on-premise servers and their heavy software meant that every update meant hours of downtime, hence not only loss of time, but also revenue.

The only way to troubleshoot this issue was to have a leaner process in place that would need lesser maintenance and could handle updates in a matter of a couple of hours or even less. Thus, the loan management system was moved to the cloud and it slowly evolved into the cloud-based loan origination system we know today.

Fintech had a substantial role to play in setting the ball rolling when it came to moving loan origination from legacy software to cloud-based, customizable software. By integrating disruptive technologies such as Artificial Intelligence (AI), Machine Learning (ML), it slowly started introducing flexibility in an otherwise rigid process, fraught with manual workflows and thus, errors.

Cloud-based loan origination systems also introduced a whole new level of efficiency by introducing transparency and collaboration into the system.

Banks and lending institutions of all sizes and formats understand the need to have a cloud-based loan management system in place. The fact that the cloud-based lending origination software market is set to reach US$ 3540 Mn by 2024 is a clear indicator of the same.

In this article, we are going to talk about the benefits of a cloud-based loan origination system, and why lenders should consider it over on-premise, legacy loan origination software.

Improved UX and greater customer satisfaction

Given the fact that there are over 4.32 Bn active mobile users globally, and over 70% of Americans are currently using smartphones for various mobile banking-related services, the time is ripe for lenders to introduce loan origination through mobile phones, as well.

Cloud-based loan origination software introduces the much-needed mobility and flexibility that is required to submit loan applicants through their mobile devices. Legacy software supported by on-premise servers restricts access to information to a few authorized personnel. This means that applicants need to be physically present at the banks to complete paperwork, documentation and verification processes.

New-age loan origination system can not only just be accessed at mere fingertips through apps on smartphones, but they also promise a better user experience through a smarter interface that helps clients walk through the process without needing much hand holding.

Smoother authentication and verification

Cloud-based loan management systems are agile by design as compared to their legacy counterparts. As such, rolling out constant and quick updates that require little to no downtime makes the system much more up to date. This is especially useful in solutions that use AI and ML to boost their efficiency levels in processes such as verification and credit scoring (underwriting). Cloud-based loan origination software allows lenders to:

• Automate the entire verification process
• Verify applicant-provided documents via multiple sources (thereby reducing the risk of unknown)
• Ensure the minimum document requirements have been fulfilled

Partial or complete automation of underwriting can help free up a lot of resources, which spells a revenue boost for lenders, reduce manual errors, and also help pass on the savings to the end consumer in the form of lower and more competitive interest rates. The latter is a major benefit that cloud-based loan origination software promise lenders, as this helps them to garner a larger market share and create a substantial presence in an otherwise competitive market.

Here are some features of automated underwriting that lenders can expect from a loan origination software:

• Easy identification of low-risk cases that can be accelerated
• Reduced underwriting time
• Automated underwriting process with a clear, error-free workflow

The updated and lean system at any given point

As pointed out before, staying updated and ahead of the dynamic changes in the tech industry is not one of the strong suits of legacy loan origination systems. Things like a spike in demand for loans could easily lead it to crash and become inaccessible to the clients it was already serving.

A growing market needs the kind of software that can be easily