Automation has been increasing workplace efficiency since the days of water-powered grist mills. And while banks have long been at the forefront of automation associated with lending, the advent of the internet, developments in artificial intelligence, and the rise of hand-held, take-anywhere devices have empowered third-party innovators and pushed leading-edge loan origination into new markets.
“Non-traditional lenders looking to increase efficiency, decision speed, and productivity while enhancing the customer experience are turning to automation specifically to streamline loan origination processes,” says Doug Peterson, a senior consultant with Moody’s Analytics. Lenders, he says, are “breaking down and examining stages of the origination process to improve and standardize legacy procedures and make better decisions faster.”
The global loan-origination software market is expected to see a compound annual growth rate of 14.70% in the eight years between 2020 and 2029, says Straits Research. The spurs to such growth? Growing demand from the pre-existing and de novo companies in the financial-service sector, and technology advancements — again, especially around AI — are propelling the market growth, according to the research firm.
Curious how AI-driven loan origination and management software can transform your business? Schedule a call with one of TurnKey Lender experts and start your digital transformation today.
Software-enabled, fully supported in-house loan origination
But Straits research published its report too early to take account of another powerful impetus to growth: pent-up demand from the coronavirus pandemic
Loan origination software automates every stage of the portfolio cycle by simplifying and improving application and approval processes. Loan origination solutions provide a holistic view of borrower transactions across all channels and products on the platform. The result? Smoother operations, happier (and often, repeat) customers. Add to this list of benefits the means to analyze business results and trends, and subsequently formulate sharper business strategies.
There are other advantages to running loan-origination software as the basis for an in-house lending program. By managing loan products centrally, loan-origination software reduces compliance risk. Loan-origination tools provide activity monitoring as well as content and resource optimization through audit trails. These tools may also include underwriting and rating software functionality and credit analysis. Cloud-based loan-origination software typically contains loan-servicing functionality for an end-to-end loan-management and customer-communications solution that integrates with all major system softwares.
Action in the face of obsolescence for better loan origination
Companies reluctant to consider in-house loan origination in favor of legacy in-house applications or outsourced loan processing, might want to consider a recent move by Adobe. Just two years after the software giant updated its content-management offering, it released a new overhaul last summer. “The company saw that the market was developing fast and the platform would become obsolete,” writes BusinessMatters.
In other words, Adobe looked at conditions on the ground and concluded it and its customers needed a new take on content management rather than a system — even a relatively new one that doesn’t adequately address new issues or leverage emerging technologies.
“Adobe drives home a profound point,” says Dmitry Voronenko, CEO and co-founder of TurnKey lender. “Business software systems are only adequate to the extent they support a company’s ability to compete and grow.”
Past that, Adobe makes an important point about obsolescence, according to Voronenko. “When a company builds its own loan-origination platform, it’ll be tempted to limp along on existing technology, even when that technology isn’t adequate to the demands of the marketplace anymore.”
Loan-origination platforms that just never get old
The same holds true for outsourced platforms. “In fact,” adds Voronenko, “you may never know what technology the bank that provides your customers with credit services is using, still less how old it is.” With an in-house lending-software solution, on the other hand, it’s in the software maker’s best interests to provide its clients with the latest technology before they even ask, he says.
But how is a company — whether it caters to consumers or other businesses — supposed to know when its lending platform is out of date? There are five main ways.
1.Business goals become more difficult to attain
If monthly tallies for green-lighted loan applications start slipping while competitors continue to thrive, the problem may be that your marketing software isn’t as integrated with your loan-origination software as it should or could be, resulting in good prospects being turned away. The solution is a loan-origination software that makes deep integration easy.
2. Communication breakdown
What else would you call when younger consumers turn away because you won’t let them reach out to you in multiple ways? If all you offer is a “contact us” online form and a telephone number, you’re up against competitors that let customers reach them via chatbox and instant messaging as well.
3. Dead-end interfaces
Web- and mobile-savvy customers — read: most people under age 70 — know what they want from an interface. Do you? Loan-origination software vendors like TurnKey Lender work with consumers to understand the workflows they like best. Following up on these insights by providing dynamic personal accounts for two-way communication, tracking past activity, and keeping up with progress on and payment dates for current loans will make your business extremely customer-friendly.
4. Your security isn’t up to scratch
Outdated security can open breaches that hackers can use to infiltrate your systems and steal your customer’s private data. For example, TurnKey Lender — which has SOC 1 and SOC 2 Type II compliance reports and the globally-recognized ISO 27001 certification — works to prevent such attacks by having its solutions audited internally and by third-party experts.
5. Your rivals are up to something
If your competitors are using a loan-origination software system as up-to-date as TurnKey Lender’s, they’re able to zero in on loan applicants who pose little risk but don’t measure up to traditional measures such as credit-bureau scores. With permission, TurnKey Lender’s AI- loan-origination — powered by deep neural networks and machine learning — delves into spending patterns, billing histories, behavioral-finance “tells,” and other reliable indicators. The result? An influx of “undiscovered” borrowers that can tip competitive scales in your favor. Alternative scoring is something you simply can’t afford to do without.
“There’s an excellent reason most creditors are eager to boost their digital automation and zero in on loan origination, says Vornenko, referring to a 2020 survey by TurnKey Lender. “They know borrowers want to get their financing where they need it, when they need it, and how they want it.”
Adds Voronenko: “The logical response to this demand from creditors, is to view those loan-origination needs as a checklist for your company’s competitive health, and make changes accordingly.”