Steps of the Commercial and Consumer Lending Process You Can and Should Automate in 2024

The digital lending entry barrier got lower than ever with the rise of intelligent, functional, and user-friendly FinTechs. Now anyone can launch an end-to-end lending automation platform to compete with large-scale financial institutions on a level playing field. And this doesn’t only apply to alternative lenders, pretty much any SME, retailer, e-commerce or manufacturer can deploy a fully-fledged bank-grade lending program from scratch within days and reap the benefits that would previously go to a bank. With little to no extra effort and management overhead.

The main thing that levels the playing field for smaller businesses is technology. Big banks often choose to create their own custom solutions and support tons of legacy code. That’s where alternative, embedded and business lenders can gain a competitive edge by deploying an end-to-end lending management system that has all the functionality out of the box.

With TurnKey Lender, one can automate every step of the process of lending for a project. All that’s left to a business owner is to set up an effective website and take care of marketing. But there are still some common myths when it comes to what automation can and cannot do. And believing in these myths leads lenders to higher operational costs and more human error in the things that could be more secure and much faster have they been automated.

Lending automation made accessible to everyone, not just banks

It’s easy to assume that a proprietary financing program is off-limits for a car dealership, equipment manufacturer, a medical institution, or someone else selling goods or services. Well, it’s not.

It’s the same as with people who humanize their cars until they change a tire and understand that’s it’s nothing more than a ton of metal, plastic, screws, and rubber. Lending tech is similar in that it’s just a specific set of functional modules and integrations that you need to set up and deploy correctly. Then all you have to do is maintain a working mechanism and enjoy your financing program the same way you enjoy not using public transportation.

Loan application, risk evaluation, credit decisioning, origination, underwriting, servicing, collection, reporting – all of that sounds complex only for as long as you haven’t taken an advanced lending automation system for a test-drive.

General areas of a lending operation that can and should be automated

When we at TurnKey Lender say that all the steps of the lending process can and should be automated, we mean it. Just to show you an example, our platform takes care of the following for our clients:

1. Loan origination
2. Risk evaluation
3. Credit decisioning
4. Underwriting
5. Collateral management
6. Debt collection
7. Loan servicing
8. Reporting
9. Supervision
10. Regulatory compliance
11. And much more. You can see for yourself when you have a demo of the system from our team. 🙂

With TurnKey Lender this bank-grade level of automation doesn’t take huge investments. But we’ll talk about that a little bit down the road. Most importantly, automating all of those steps helps lenders:

• Cut credit risks, thanks to AI-driven credit scoring.   
• Replace outdated processes with software tailored to the business’ needs.   
• Eliminate unnecessary paperwork throughout the lending process.  
• Reduce operational cost of running a lending business.    
• Get rid of any human error in the entire crediting process.  
• Reduce the cost and time-to-market of launching an e-lending business.  
• Unify all of loan management tasks in one end-to-end platform. 

In this guide, we’ll go over each of those lending process elements and see which you should automate in 2023. And we’ll start with origination.

Loan origination tasks that can be automated

For both consumer and commercial lenders, loan origination covers everything that happens between a customer submitting their loan application and the funds being disbursed or the loan being declined. So that’s quite a chunk of work. In the past, it used to take a staff of originators. Now their work is done by intelligent algorithms. And the steps to automate here are:

Configurable loan application – the clients should be able to fill out all the forms online in their browser and device of choice. The form should be tailored for the specific loan product and depend on the jurisdiction’s local and international regulations. It should be easily adjustable for the lender and easy to use for the borrower.

Adding and verifying bank account – borrowers should be able to quickly and easily add and verify their bank account details to the loan application. In addition, modern lenders will automatically collect and use bank statement data to allow for a more accurate credit scoring.

Application processing – of course, pretty much any lender will want to involve a human being in the loan approval process. But the application processing should be automated to the highest possible extent. The key here is the proprietary advanced scorecard. This intelligent piece of software should be included within the system and have an intuitive back-office interface for customization. This will help loan managers make informed decisions based on automatic borrower evaluations.

Email communication – Of course, there should be an option for the client to get in touch with the real person at any moment, but why do manually what is better done automatically. There should be a customizable email template editor that sends custom emails to potential customers on certain triggers.

Underwriting and risk-scoring tasks to automate

Loan underwriting – the right underwriting automation will include a proprietary credit scoring model that helps the business reduce credit risk and improve portfolio yield. Lenders often have their own scoring criteria, which they should be able to add to the system. But keep in mind that the solution you choose must have advanced scoring algorithms built-in out of the box.

Loan decisioning – even though, there should be a way for a loan officer to manually approve, deny or send back loan application, the system should provide you with all the insights and analytics required to make an informed credit decision. And, if you want it to, it should be able to process the loans on its own.

Risk evaluation – this one’s tricky. But advanced automation solutions utilize AI (machine learning and deep neural networks), Big Data, as well as traditional and alternative evaluation approaches to help lenders make the most accurate decision possible.

Loan offer – once you’re ready to approve the loan, there needs to be an option to extend one or several loan offers to the borrower which they will receive in the personalized web-based borrower portal.

Electronic signatures – everyone’s already used to being able to sign documents online safely. That’s why it’s important that when a lending operation goes fully digital, it should have seamless integration with well-known e-signature software like SignNow or Adobe Sign.

Loan servicing tasks to automate

Loan servicing is another sphere where automation can make a business owner’s life significantly easier. And it’s not just about the disbursing funds for the approved loans and monitoring the repayments.

Digitalization of statements – the expensive and hard to manage paper statements should long have been automated and digitalized. Given that all the data is located online these days, that’s more than real.

Interaction tracking – all the interactions between the lender and the borrower should be logged, collected, and easily accessible by the system admin. The data that should be automatically collected includes things like payment history and customer service queries.

Credit bureau data updates – the system should automatically sync with the credit bureaus to pull the recent data and update it for all the borrowers.

Payments alerts and reminders – the users should get automatic alerts reminding them about upcoming or overdue payments. As well as the lender should get alerts when there’s any potential for bad debt so that they could react accordingly.

Account management – users’ details and documents should update automatically each time status is changed or payment is overdue.

Schedule management – borrowers prefer lenders who not only provide better loan terms (thanks to costs saved through automation and risks cut through AI-driven scoring) but also those who can emphasize with them and change the schedule, rollover some payment or adjust the fees when the need arises. TurnKey Lender provides an unmatched flexibility when it comes to charging payments and managing the loan schedule.

Loan collection automation

Action planning – for each new client, lenders need an easy way to set up a separate collection and action calendars. They may want to check in on it manually, but once the workload grows, the required actions need to happen automatically.

Write-offs – knowing that the write-offs happen automatically without manual action, lets lenders focus on more important things. At the same time, the borrowers should receive notifications and alerts about the upcoming and overdue payment and monitor automatic write-offs.

Collateral management

Collateral types, valuation, and revaluation – the system should be flexible enough for the users to submit their collateral and for the managers to have everything they need to work with these assets.

Automatic loan reporting

Portfolio, performance, risk ratings, collection rating reports – to stay up to date and have a firm grasp on what’s going on with the company, lenders need all kinds of reports about their borrowers, loans, and risks. TurnKey Lender lending software will collect, process and format all the needed data to put together proper and easy to digest reports.

Regulatory compliance

Compliance might be the biggest head- and heartache of the lenders globally. With the laws changing all the time, it may be hard to adjust and keep track of all the updates. Advanced lending software, if integrated with the right compliance solutions, can make lender’s life all that easier by automatically controlling the borrower’s quality, collecting all the required documents and keeping business compliant from the start. Not to mention reporting functionality that transparently stores and archives all the data in a fashion that will please the regulator.

Data imports/exports, integrations, appearance, employee tracking, and much more

Providing borrowers with the experience they have come to expect in the digital post-pandemic economy requires a ton of functionality that is interconnected and operates as a single well-oiled machine. From adjusting the application form to collecting the required data, understanding the inputs and analysing them, making a system decision of a loan, building a schedule and collecting the installments – creating all of the features and integrations from scratch is a herculean task that took TurnKey Lender’s award-winning team years. But the result – the most sophisticated, intelligent, and powerful lending automation software on the market – is worth it.

Based on the input we’ve gathered from our clients in 50+ countries, we’ve built the Unified Lending Management software which solves all of the challenges a business faces when entering the lending space anew or automating the operations of an existing crediting business.

How TurnKey Lender does that for you

All of the lending tasks described above and much more are already realized in TurnKey Lender’s end-to-end solution for creditors of all sizes. Origination, underwriting, collateral, servicing, collection, reporting, etc – our software does it all letting you focus on finding the leads for the platform to process.

The majority of lending operations still do many of these tasks manually. Imagine the amount of time and money wasted. Not to mention, all the demographics that stay unserviced because of operational difficulties and unfair credit scores. By providing lenders worldwide with affordable, accessible and easy to use tools, TurnKey Lender works on achieving global financial inclusion. And with that in mind, our goal is to make lending fully automatic, freeing our customers to deal with other important things.

TurnKey Lender’s solutions are white-label (so you will be able to add your own branding), easily deployed from the cloud, secure and powered by the most advanced AI and machine learning algorithms.

The pics you saw in this post are from the TurnKey Lender Box solution  – an end-to-end system that can be deployed and fully operational within a day of signing a contract. It is created specifically to address all the needs of any kind of lending operation from the get-go. And if you want to go even further with your customization freedom, consider TurnKey Lender Transformer. There are objectively no better lending solutions on the market right now. And we keep on improving all of our products, so that isn’t going to change any time soon.

If you aren’t using TurnKey Lender yet, do get a personalized demo of the system. And if you’re already a client and would like to see if there’s anything else we could automate in your lending operation, feel free to get in touch with your TurnKey Lender manager. Either way, our team will be happy to show you around and demonstrate exactly how our tools will take your business to the next level.