Digital Lending Can Help Banks Boost Their Loan Origination Revenues & Net Promoter Scores

In a world that is largely moving towards digitization and disruptive technologies such as AI and IoT, banks have been unable to incorporate and utilize these technologies into their processes, leading them to scoring the lowest customer satisfaction or Net Promoter Scores, across industries.


With tightening market conditions and mediocre economic prospects, banks are fighting to keep up with their new and largely digitized counterparts, such as the new P2P firms, which are set to originate close to $1 Tn worth of loans, by the year 2025. These Fintech companies are using their automated loan originating platforms to cut costs and also provides customers with better overall engagement and satisfaction, an area where banks following traditional methods are lacking, vastly.


Loan and mortgage have always been the key revenue sources for banks. Yet, with their loyal customer base and with majority of people trusting traditional banks for all their financial operations, banks seem to have come to an economic standstill.


The reason is the complex and traditional loan origination process that banks still follow. The huge amount of paperwork that is required along with long processing times and costs incurred from the time of loan origination, to its processing and administration, not only lowers the banks’ ability to service more loans in shorter time, but also drains the loan seekers’ ability and enthusiasm to seek a second loan or mortgage.


Customer retention is one of the biggest ways to cut costs on acquiring new clients and happy clients make for evangelists for any company. Banks need to up their game at improving customer satisfaction levels by digitizing not just loan origination, but the entire loan and mortgage process. It is only by reducing paperwork and automating the process that it can:


  • Reduce errors
  • Increase loan processing efficiency
  • Improve loan turnaround times
  • Process more loans
  • Lower loan processing and handling costs
  • Increase customer satisfaction
  • Expand their customer & service portfolio

Current loan origination scenario at banks (in numbers):


  • Loan origination is the least automated process in banks. Only 40% of the loan origination paperwork is digitized with the rest being handled in traditional paper format.
  • A major portion of the underwriting process, about 40%, is manual while 50% of the paperwork received from the customer is paper-based.
  • Approximately, 70% of banks consider small business loans and residentials mortgages to be resource-intensive and costly processes.
  • More than 50% of the loan closing documents are paper-based.

By streamlining loan documentation, information flow, processing, and administration, banks stand to improve data security, customer satisfaction, throughput, and increased productivity, thus reducing wastage and costs.


How can Digital Lending in banks help improve customer satisfaction?

Integrating digital lending into a bank’s loan origination process can help customers access loans, easier and quicker. The hassle of handling paperwork can be done away with by digitizing paperwork and automating the entire process, right from origination, approval, disbursement, and closure.


Easier the loan application and administration process, higher are the chances of customers returning to banks for subsequent loans and other financial services. Automating and digitizing the loan and mortgage process can help save valuable time and resource for both banks and customers.

Areas banks should focus on to digitize everything end-to-end

There are three main areas where banks should focus to ensure complete automation of loan and mortgage processes, thereby streamlining the activities to the fullest. They are:

  • Collection of information
  • Access to information
  • Analysis of the information

By automating customer information and having their complete profile digitized, can help relationship managers access customer information easily and also reduce delays which are generally caused due to incomplete filing of information.


By having an online application process in place, customer information that is entered is stored in a common database, at once. This includes all relevant personal information of the customer, including their financial history, previous loans and mortgages, guarantors, etc.


Digitizing access to this information can help improve the efficiency of the entire credit team by improving transparency and reducing hold-ups.


Having complete and free-flowing access to the all digitized documentation can help loan processors match up the information they have with that of third parties such as appraisal firms, credit bureaus, insurance firms, and other concerned financial institutions on a single dashboard.


Agile SaaS provided by service providers to digitize loan processes can also customize a bank’s loan processing workflow the way that resembles their standard procedure. This helps banks digitize the process without making the entire credit team adapt to a new system, altogether. It is the same process they will use, just that it’s now automated, more user-friendly, with better security, and error-free.


One of the most important back-end functions that banks should look at digitizing is analytics and intelligence.


One of the biggest issues in loan processing and approvals is the method and calculation that each lender/analyst/underwriter uses. This can lead to unreliable, error-prone results and reports. When a bank uses a digitized loan processing dashboard, the entire team uses the same automated solution and can access, analyze, and price each loan more uniformly than in the case of traditional loan reporting.


Having a unified dashboard view of the entire case helps monitor the risks associated with each application and use this insight to improve the customer’s interaction with the bank, in a better manner.


Adopting SaaS for digitization and automation

In order to digitize end-to-end lending processes, bank can adopt a SaaS approach instead of building their own dedicated infrastructure and technology to support the digitization effort. The latter is highly time and resource consuming and also requires a lot of maintenance and continuous updates to ensure smooth running of the same.

By adopting a SaaS approach banks can use a third-party software as a white label solution, brand it as their own and use it to extend complete digital lending solutions to their clients and ensure an enriching customer experience for them.

SaaS solutions to digitization can help banks:

  • Implement complete lending automation and digitization at a fraction of the cost that building their own infrastructure would cost them.
  • Add new products and services to their portfolio without affecting previous offerings, resulting in an increased brand value, wider portfolio, and more potential customers.
  • Customize the automated lending processes to meet the dynamic requirements of the current market and that of the future.

In a survey conducted by the ABA, 71% banks responded that they were interested in adopting SaaS to digitize their loan origination process. Banks with assets amounting to more than $1 Bn, showed higher inclination to the idea. Be it for auto loans, student loans, unsecured personal loans, or home improvement loans; irrespective of asset classes, banks are slowly moving towards automation of their processes to improve customer experience and build upon their brand, further.

In conclusion, digitization of the lending processes in banks can help them provide their customers with easier loans, a seamless loan disbursement and closure procedure, better pricing, more transparency and an expedited process through uniformity in processes. Digitization can also help banks reduce their cost of lending, thereby improving margins and ability to take on a wider portfolio, a win-win for both banks and their customers.

About LendFoundry

Headquartered in California, LendFoundry is one of the top full-stack lending platform, assisting digital, alternative, and traditional lenders improve and automate their lending services through fully-customized, end-to-end digital lending solutions.

  • November 22, 2018