Selecting the right loan origination software can be an overwhelming process. Not only do you need to determine your business requirements, but you also have to consider market changes and changing customer preferences. In this blog, we will discuss how your organization can select the right loan origination platform.

The lending market continues to grow, and along with the growing volumes, there has been a steady increase in tech-savvy alternate lenders catering to financial areas not addressed by traditional banks. Alternate lenders, such as P2P, B2B, and microfinance entities, have disrupted lending, offering digital services that traditional lending models struggle to match.

According to a report by ABA, “Cumbersome processes and slow decisions are significant problems for banks when you consider that even a one-day delay or uncertainty in responding to the customer could result in losing the business to a more agile and transparent competitor. Banks may not even realize they have lost this opportunity, as the potential customer may bypass the bank completely and apply directly through a digital lender.”

In such a scenario, it becomes imperative for your bank to invest in a loan origination platform that helps overcome your operational shortfalls, understand your customers’ needs, and offer differentiated services. At the same time, you need the ability to quickly and independently adapt to changing market conditions. To achieve this, you need to go beyond mere automation of business rules. You need to assess-

  • Does the loan origination solution automate your end-to-end lending lifecycle?
  • Does it empower your knowledge workers to help prospects/customers?
  • Does it help you reach your customers faster and build revenues?
  • Does it manage risks and regulations better?
  • Does the loan origination platform help you differentiate your products from your competitors?

Once you have evaluated a loan origination platform, keeping these questions in mind, only then can you gauge the real ‘digital’ value a loan origination solution can offer your bank. Let us discuss these considerations in detail-

1. End-to-end Automation

 You need a platform that orchestrates your business processes through workflow automation. You need to consider a platform that allows you to design, deploy, execute, track, and administer your lending process. It should ensure this from prospecting, sales, credit analysis, documentation, and disbursement to servicing.

2. Digitizing Manual Processes

Manual and paper-based processes are the biggest source of delays and errors. Using electronic documents helps reduce manual errors, overcome regulatory nightmares, as well as reduce the credit lifecycle. To support this, the solution/ platform needs to have an in-built Document Management System (DMS) and Enterprise Content Management (ECM) capability.

3. Ensuring Proactive Compliance Management

Transparency is just one side of the compliance coin. Fair business practices are the other. For both, lenders need transparency in their operations and timely control over processes, through monitoring. The best way to handle compliance is to be proactive and make it a natural part of process management instead of an add-on counter- productive measure.

4. Integration with Legacy Systems

Integration is critical for effective automation. For workflow automation and straight-through processing to yield the desired results, seamless integration with all your participant systems, point solutions, and core banking systems is the key. A platform should be able to integrate using any of SOA, APIs, standard adaptors, and, most importantly, standards.

The Mindset Conundrum – A Key Bottleneck Although banks face operational challenges, our experiences with customers globally point to a different yet crucial issue- mindset! With a long legacy of IT systems, increasingly complex operational and risk management demands, most IT leaders are stuck with the fundamental conundrum of how to act, and how to act fast.Their experiences from past transformational initiatives with large systems and point solutions alienate them from taking on ambitious process transformation programs. It’s a task that seems either too expensive, too complex or, often, both!

5. Configuration of Credit Policies

Credit Design is becoming involved and sophisticated. The expertise of your credit analysts needs to be translated to larger throughput, and not wasted in mundane repetitive tasks, case after case. Automation of repetitive credit scenarios provides you efficiency, while fast configurability provides you flexibility and agility.

6. Ensuring a Faster Time-to-Market

Time to market is critical. Buying an off-the-shelf point solution is ineffective due to the rigidity and overly standardized processes. Their inflexibility is a bottleneck in coping with fast-changing market and compliance needs. Banks need to be able to make changes fast, without having to undergo large TCO of build approach.

7. Building Functional Differentiators

Traditional lending point solutions are inflexible. This lack of configurability-across workflows, approval matrices, credit/deviation policies, data models and product definitions-is the primary bottleneck for lenders. The ability to customize the platform, as if building your own commercial lending process, and being able to do it fast, is the key.

8. Unification of Lending Offerings

 Disparate point solutions create duplication and redundancies in the system while creating undesirable process gaps. Banks need a unified platform that brings the functionality of all lending processes under one umbrella; thus, enhancing the operational efficiency of business users.

9. Empowering Knowledge Workers for Better Decision Making

Commercial Lending is a complex and people- intensive process. It is imperative for your knowledge workers to be able to take accurate and informed decisions. However, these decisions may depend on a variety of factors. To ensure timely and informed decisions, they must be provided with all the relevant information, on time and in the required form. And, they need to utilize their time in doing what they do best, and not on mundane repetitive tasks.

10. Staying Mobile

Mobility provides you an interface, but for it to be effective, it should be a natural extension of the lending process. Capture of information and documents through mobile or any other interface should be seamless. Reviews and approvals should be possible on-the-go. Monitoring dashboards should be available on mobile.

Sources: Documents/ABADigitalLending-Report.pdf

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