The ROI Myopia in Commercial Lending

Why Traditional ROI Models Fail Lenders?

For decades, banks have measured the ROI of their Commercial Loan Origination Systems (LOS) using narrow, cost-centric metrics focusing on turnaround time (TAT), operational efficiency, and IT cost savings. But this approach is dangerously short-sighted.

Digital lending is no longer optional yet only 11% of banks had digitized commercial lending as of the ABA’s “State of Digital Lending” study. Fintechs and alternative lenders, free from legacy burdens, are aggressively capturing market share with faster, seamless, digital-first lending. Traditional ROI models are leaving banks blind to the real value drivers of modern lending.

This whitepaper explains why lenders need to expand their ROI lens beyond technology cost and cycle time and consider the true business impact of loan origination systems.

The New Lending Reality Why Change Is Urgent

• Customer expectations have shifted: Borrowers want faster approvals, personalized offers, and omnichannel access.
• Competition is tougher: Digital-native fintechs are redefining speed and experience in commercial credit.
• Regulatory demands are higher: Basel III, Dodd-Frank, and AML/KYC regulations require robust auditability and risk management.
• Legacy silos are unsustainable: Fragmented systems slow growth and limit cross-product leverage.

Loan origination is no longer just a back-office process it’s the engine of the entire lending business. Choosing and measuring the success of an LOS must go beyond IT ROI.

Moving From ROI Myopia to Holistic Impact

Traditional ROI measures like reduced TAT and lower IT spend are still important but insufficient. A modern ROI framework for digital lending should cover five key dimensions:

1. Customer & Revenue Impact

• Wallet share expansion: Cross-sell multiple loan products on a unified platform.
• Higher engagement & satisfaction: Reduce abandonment, improve Net Promoter Score (NPS) and CSAT.
• Better digital experience: Omnichannel access, self-service applications, and faster approvals.
• Increased loan volume and revenue per loan: Faster cycle times lead to more throughput and improved topline.

2. Operational Efficiency

• Improved loan pull-through rate: Convert more applications into funded loans.
• Reduced rework and exceptions: First-time-right data capture and document management.
• Higher workforce productivity: Free relationship managers (RMs) and credit analysts from routine work with automation and RPA.
• Scalability: Handle more loans with the same headcount.

3. Risk & Compliance

• Stronger credit decisioning: Better data, rules engines, and real-time insights to reduce NPAs and credit losses.
• Compliance-ready audit trails: Lower penalties and faster regulatory reporting.
• Early fraud detection: AI models to flag anomalies and reduce leakage.

4. Agility & Innovation

• Faster time-to-market: Launch new lending products and channels quickly.
• Configurable workflows: Adapt to changing credit policies and regulatory norms without heavy IT intervention.
• Future-ready architecture: API-driven integration to work with fintech partners and emerging tech.

5. Human Empowerment

• Knowledge worker enablement: Equip underwriters, risk managers, and RMs with real-time data and smart routing.
• Self-service & low-touch processing: Reduce manual intervention where possible.
• Improved customer and employee experience: Omnichannel touchpoints, real-time updates, and mobile-first capabilities.

The ROI Equation for Digital Lending

Business strategist Ram Charan defines ROI simply:

ROI = Margin × Velocity

For lenders, this means maximizing profitability (margin) while speeding up the lending cycle (velocity). A modern LOS must improve both:

• Margin drivers: Increased revenue per loan, better risk control, lower cost of processing.
• Velocity drivers: Faster time to approve, fund, and renew loans.

By combining these factors with enhanced customer experience and compliance, lenders can achieve true ROI not just cost-cutting but growth and resilience.

The Cost of ROI Myopia

Lenders relying on outdated ROI models risk:

• Lost growth opportunities: Can’t cross-sell or expand wallet share effectively.
• Higher operational costs: Legacy LOS forces manual workarounds and rework.
• Increased regulatory penalties: Lack of built-in compliance and traceability.
• Poor customer retention: Slow and fragmented experiences drive borrowers to digital competitors.

How Newgen’s Approach Fixes the ROI Gap?

Newgen’s Commercial Loan Origination Solution (CLOS) is designed to deliver holistic ROI by combining:

• Unified digital workflows: From origination to monitoring, eliminating silos.
• AI & RPA-driven automation: Faster, smarter processing and early risk detection.
• Low-code agility: Rapid product launches, configurable credit policies, and seamless core system integration.
• Enterprise content management (ECM): Centralized, secure, and easily accessible loan documents.
• Future-ready innovation: Open APIs and composable architecture to scale and integrate new technologies.

Recognized in the Gartner® Market Guide for Commercial Loan Origination, Newgen helps banks move beyond cost-focused ROI and measure real business transformation.

Measurable Business Impact

Banks adopting a holistic ROI approach with Newgen have achieved:

• 40–75% faster loan cycle time
• 50% improvement in pull-through rates
• 90–95% compliance accuracy
• Up to 50% lower operational costs
• Significant increase in customer retention and cross-sell opportunities

Why Acting Now Matters?

Fintechs and digital-first banks are redefining lending. Traditional institutions that delay modernization risk losing both customers and profitability. Moving beyond ROI myopia isn’t just about better metrics it’s about staying competitive and future-ready.

Start Measuring ROI the Right Way

If your bank is still evaluating LOS performance using legacy ROI models, it’s time to shift your perspective.