The lending industry is experiencing a revolution thanks to a new age of digitization and automation.
Legacy systems that were marked by slow, inefficient, and siloed lending management are quickly becoming relics of the past. A customer-driven approach is taking center stage as digital innovation in the financial services sector continues to evolve. Alternative lenders are now streamlining their lending processes through real-time decision-making and true end-to-end management.
The ability to scale is accelerating like never before. Agile technology for risk assessment, stakeholder collaboration, and improved visibility are just a few of the advancements that have taken what was once a lengthy process for borrowers down to minutes.
In this article, we’ll explore what these advancements in digital lending mean for your business.
Legacy Lending Systems are Holding Your Business Back
No matter what kind of lending business you have, if you’re not rapidly adapting, you’re losing deals and revenue. In 2022, alternative lending is all about speed, agility, and efficiency (aka, modern technology). In this respect, legacy loan management systems present a number of challenges for alternative lenders, including:
- Time. How much time is being spent on manual processes where your business could benefit from automating routine tasks? If you’re spending 30 to 40% on tasks that could be automated due to disaggregated systems, you’re wasting valuable human capital. Time spent on manual processes is time that could be used elsewhere.
- Costs. A lending infrastructure built with outdated technology is not only costly to maintain, but it’s also severely limited in its ability to adapt to the changing demands of the market. Investing in modern lending technology might mean an increased investment up front, but it results in drastic cost savings over time due to improvements in efficiency.
- Scalability. Growth for lenders is all about closing deals. The ability to scale or expand into other service offerings or adapt to offer more complex loans is crucial for your future survival. Legacy technology is limited in this respect as it depends on disparate, siloed, and difficult to upgrade systems.
- Lack of Insight. Operating on piecemeal data with legacy software systems and infrastructure doesn’t allow for fluid, real-time reporting. This leaves lenders with inefficient processes with regard to credit analysis, underwriting, and portfolio management.
- Vulnerability: Manual risk assessments via outdated credit risk models leave institutions exposed to fraud and susceptible to cyber-attacks. While no solution is truly risk-free, modern technology adds additional layers of security to the lending process with automated/data-driven verification and authorization methods.
If you’re spending your time, energy, and resources completing redundant tasks as you attempt to bridge the gaps between your legacy lending management systems and the needs of your lending business, you’re not closing deals.
Technology is the Differentiator for Risk Management
New technology is empowering alternative lenders to be more efficient and less vulnerable to risk or fraud via automation, collaborative workflows, and data-driven decision-making.
Your technology could be the actual tipping point between effective risk assessment and reduced profitability. In fact, this point was emphasized by PWC in a 2016 alternative lending study focused on the future of agile lending technology:
“A credit assessment framework aided by the requisite analytical capability enables a firm to select the right borrower in the crowd. This is the single most important factor determining the long-term success of a firm and has to be diligently developed. Since digital channels are predominantly used to interact with customers, the challenges of customer acquisition and experience can be tackled through the implementation of up-to-the-minute user interface design solutions.”
Traditionally, loan application processing required a lot of time and manual effort. Speed and accuracy were missing from the process, and, even worse, traditional credit scoring models weren’t always accurate in preventing negative outcomes and financial losses. Agile technology is revolutionizing the risk management process by offering lenders the ability to quickly assess creditworthiness via complex and automated analyses that cover a wide range of historical and transactional data points.
Automating the credit risk assessment workflow results in a highly accurate prediction of borrower behavior while significantly reducing the amount of time it takes to analyze applications. These rules-based systems also learn as they go, improving the accuracy of predictions over time in a way human-based scoring models never could.
Your choice of technology for digital loan management is a critical decision, requiring a careful analysis of the systems you will use and the benefits they bring to the table.
How Alternative Lenders Are Preparing for Digital Transformation
While the benefits of agile technology are many, it’s important to note that the process of adoption and implementation is not without its challenges. To get the most out of your investment in this new era of alternative lending, there are a number of steps your organization can (and should) take to lay the groundwork for success.
First, Define Desired Outcomes
What is it that you are aiming to achieve? It’s tempting to implement multiple new methods all at once, but unless you have an endless budget, this is not a sound strategy for success. Assign a clear goal to each area of digital development. Do you want to reduce risk? Speed up processes? Improve customer engagement? Define your goals, align them with your business strategy, and look for a technology provider that can help.
Next, Get the Team on Board and Set Expectations
Too often digital transformation is ineffective because of a lack of organizational buy-in. Look to communicate value ahead of time (the benefits outweigh the costs!) and present a financially sound case for making a shift to more agile lending technology. Be sure to set clear expectations, keeping in mind that implementing a modern lending platform will involve a lot of moving parts.
Lastly, Consult your Provider and Consider Outside Help
It’s important to recall that adding new systems and technology to your lending workflows may mean you need additional resources. Don’t let a lack of technical knowledge stall or interrupt the modernization of your business. Start by assessing your current tech provider’s capabilities, determining what support and expertise your SaaS platform offers. Additional team members, resources, training, or meetings may be required, or you may need to supplement with a third party. This investment is well worth it and should be planned for at the outset of your transition.
Will you encounter roadblocks along the way? Absolutely; change is difficult for any organization. A clear strategy, proper expectations, and organizational buy-in will set a foundation for you to work through any hurdles that may arise as you incorporate agile technology into your lending business.
As you work through these steps, keep in mind how digital transformation can help you stand out in a competitive market:
- Real-time decision-making driven by business intelligence.
- Advanced rules-based engines for accurate assessment of creditworthiness.
- Lower costs over time due to compounded efficiencies.
- An exceptional user experience.
- Ability to scale.
Grow Your Lending Business With Onyx IQ
No matter where you are in the journey to digital transformation, it’s worth examining the cutting-edge technology now available to find out what the impact on your lending business could be. Onyx IQ is a digital lending platform that allows lenders to automate every step of the loan management process, offering the tools to originate, underwrite, and close more deals.
Check out the future of alternative lending first-hand by scheduling your Onyx IQ demo today or reach out to us directly at info@onyxiq.com.
