How Much It Costs to Digitalize a Lending Business

To get into the real lending game thirty years ago, one needed immense resources. And not just loads of cash available for crediting, but also money for opening and maintaining offices and branches, originators, servicing managers, underwriters, collectors, analysts, etc.

The market is different now and companies like TurnKey Lender significantly lowered the entry barrier into the industry. Yet, launching a lending operation still comes at a significant monetary price. In this post, we’re looking into the expenses a lender wannabe will have to spare in order to become a fully-fledged member of the digital lending game.

Of course, the final sum will differ for each lending business type, jurisdiction, and the scale of the launch. We’ll give you a rundown of what you’ll most probably have to spend money on to digitalize your lending business.

 

Lending processes automation for digital lending

Different lenders have different automation needs. Some only require a module for borrower evaluation, decisioning, and funds disbursement, some need a hand in servicing, some in collection, and then some need automation of their entire lending process.

For a lending business, the end-goals of digitalization are:

  • the reduction of operational costs
  • faster loan approval and management processes
  • minimization of human error on every stage of loan’s lifecycle
  • increase in risk evaluation accuracy

In order to achieve that, the perfect case scenario is when a lending business is willing to create their digital presence from scratch rather than build upon a legacy solution as it usually takes an enormous amount of effort to integrate outdated software with an end-of-the-line modern platform and maintain their compatibility in the future. Extracting and moving data from a legacy system may take quite some time, but in the long run, it’s well worth it.

That said, savvy lenders try to get as much automation as they can from a single provider rather than turn to different vendors for separate modules. This way you run lower risks of software failures, databases uncompetitiveness, and system downtimes. Not to mention, getting separate functional modules from different providers will require much more money and will increase the time to market of your new digital lending platform.

Now, the problem here is that the vast majority of lending automation providers don’t have a wholesome system that you can just plug in and work. More commonly they focus their efforts on some particular aspect like risk evaluation or servicing. At TurnKey Lender went another way and took our time to create a modular all-in-one solution. This way with us lenders can choose either variant:

  • Get an end-to-end solution to automate every step of their lending process with us
  • Just get a module they need (origination, servicing, collection, etc)
  • Get the module they need and then upgrade to implement new functionality from our system

With us, pricing starts at $500/month for the end-to-end solution and the number of users is unlimited. The final price depends on the type of lending operation, the size of the business, the amount of required system customization, and other influencing factors. You can reach out to our sales staff for a quote or get a free trial to see for yourself exactly what we can do for you.

We have been working with lenders for several decades now. We know their pains and needs. To address them, TurnKey Lender team came up with an innovative pricing model in which the final amount depends on the number of loans customer issues with the software rather than a flat fee. This way the company stays invested and highly motivated to help every client achieve better results and help their business succeed.

Keep in mind, that with products this complex, if someone tells you the exact price right away, it usually means that their margin is so high that it has the maximum possible customization included into the price they charge you even if you don’t use it.

 

Lending-related paid integrations you’ll need

Credit bureaus – If you already have a lending business up-and-running and just want to go digital, you already have access to data from one or more credit bureaus. But for a completely new lending operation, you’ll need to research your market and get access to credit bureau data to use in your credit decisions. Of course, many digital lenders rely on alternative borrower evaluation approaches, but most still factor in credit bureau data into their decisioning process to improve accuracy.

Needless to say, different jurisdictions have different credit bureaus and the price of the plan will depend on the amount of data you’ll need, detalization, accuracy, number of requests, etc.

 

Payment providers– In order to achieve a truly digital experience for your users, you will need seamless integration with a modern payment system like Authorize.NET, PayEasy, or PayPal. This will let you put collection and payment processing on autopilot which otherwise would be rather daunting tasks.

 

SMS/Email systems – a system like TurnKey Lender comes with all the functionality required for effortless email and SMS communication built-in. But you will still need to get integrations with providers like BulkSMS, ActiveCampagin, Mandrill or Gmail in order for it to actually send out notifications to your borrowers (or potential clients).

 

E-signatures – to ensure proper online document management, you’ll need to get your lending platform integrated with e-signature software like Adobe e-Sign, SignNow, or eSignLive, which in most jurisdictions is also important in terms of regulatory compliance.

 

Staff expenses of a digital lending operation

Even though automation of lending comes with a drastic reduction of expenses compared to a brick-and-mortar operation, you will still need people to oversee the system.

For example, our AI-powered algorithms can automate the origination processes fully without the need to involve people in risk evaluation or credit decisioning. But generally, lenders still prefer to have a real person making the decisions.

Put real simple, it goes something like this:

the system analyzes all the data and evaluates all the risks and then presents your originator with an easy-to-understand interface where they have all the data to make a credit decision within seconds. Then they either decline an application, approve it and send it further in your business workflow or request additional data from the borrower.

To cut a long story short, you will need far fewer people on your staff, but there will still be staff expenses.

 

Web presence for a digital lending business

Now that we’re done with the part of expenses related strictly to lending, let’s go over the other things a successful digital lender has to pay for to build a decent online presence.

Website – a digital lending business begins with a website. That’s the first thing that meets the potential client’s eye and you want to make a good impression. Because the thing with digital lending is that the borrower doesn’t even need to go across the street to strike a deal with a competitor. Rival’s website is already opened in the very next tab.

So if you’re on a tight budget, you may get a ready-made website template and fill if with content yourself. Of course, this way your expenses can be as low as $70 for a website template, $100/year for hosting and $10 for a domain name. But that’s not the look and feel a reliable digital lender wants to convey. So if you can, consider investing in a proper website.

 

Design and development – investing in the design and development of a custom website may seem like an overkill, but that’s the 101 of making a memorable brand. The competition out there is fierce so you need to stand out.

 

Marketing – build it and they will come doesn’t work with digital lending. Even with superior user experience and competitive interest rates, you need to invest in copywriting, ads, SEO, email marketing, and other kinds of online promotions. Marketing can be expensive but it’s also extremely important. Especially in the beginning, until you gain traction and achieve brand recognition. So consider hiring an experienced specialist/team to get it done right. No one wants to have an awesome product that nobody can find online and use.

 

Final thoughts

In our experience, these are the most important and costly things every newcomer to the digital lending industry faces. And even though it may seem overwhelming at first, in reality, it’s incomparably easier and cheaper than running an old-school brick-and-mortar lending operation.

After all, the biggest and the most important thing for today’s lending business is the lending automation software it runs on. And with TurnKey Lender’s AI-driven decisioning and smooth adjustable workflows, your operational efficiency grows on average by 283% and portfolio profitability improves by an average of 65%. So if you’re not decided yet on the lending automation platform you’re going to use, reach out for a free trial and a demo. We’ll be happy to show you what we can do for you.

Digital lending ain’t easy. But with TurnKey Lender, you lower the risks and increase the returns.

Opt-in for a free trial and start your digital lending journey the right way. Request a Demo