What Is the Digital Transformation of Banks

Blog Post

Digital transformation for banks means making a brave and a long-overdue step toward intelligent automation and processes streamlining. But with the right tools, digitalization not only pleases the clients but also leads to a reduction in operational spending, an increase in efficiency, and growth in the core business.

Customers have come to expect a certain level of immediacy with their online banking experiences, and lending has been the last major part of banking that hasn’t embraced the digital age. But now that the technology is developed and stable enough, banks, credit unions, and other traditional lenders can go through a digital transformation painlessly and give a fair fight to the alternative lenders.

Digital transformation isn’t a voluntary process for banks. It’s the harsh new reality of the market that makes traditional lenders play catch-up. For decades banks had an overwhelming monopoly on the lending market. Times have changed as banks started to lag in terms of the online experience they deliver. Digital transformation of a bank is seen as an incredibly expensive and lengthy process. But it doesn’t have to be like this.

A while back, banks had every chance to lead the digital revolution by example. They had the resources to go fully digital and provide borrowers with a secure, fully online experience. But the lack of competition made them stick to their old systems without transforming and reforming their enormously complex outdated processes. For far too long, they were led by the good-old “if it ain’t broke, don’t fix it” principle. The only problem is that it was “broke”.

Due to that approach, the banks lost a big chunk of the marketplace that got filled by companies that lean into technology instead of tolerating it.

Remember when ten years ago e-commerce was the buzzword everyone was using too much? Then providers like Shopify came along and lowered their industry entry barrier to the point where anyone could launch a well-designed easy-to-use online store within a day and on a limited budget.

That’s what’s happening to e-lending right now with FinTech providers like TurnKey Lender providing accessible and intelligent lending automation solutions for Unified Lending Management (ULM). With them, anyone from a retailer to an auto dealer, to an alternative lender, to a large-scale telecom, a credit union or a bank can launch a fully functional, end-to-end, intelligent, and easy-to-use automated lending operation.

Digital Transformation Trends

It’s easy to get caught up in doing things the old way and ignore the new trends and styles of doing business. But nothing speaks to people in finances as clearly as numbers. So here’s just a couple of stats to give you an idea of what the borrowers have come to expect from their lender.

  • The most common method for applying for a small-business credit card or line of credit is a desktop or laptop computer, yet 60% of small businesses rate their bank as average or needing improvement during the digital onboarding process. – Deloitte
  • By 2025, 92% of loans will be originated online – Cap Gemini
  • Millennials now make 54% of their purchases online – Pure360
  • 62% of global banks expect to be digitally mature in 2020, compared with just 19% in 2018 – E&Y
  • Almost half of millennial respondents ages 18 to 34 said they’d consider moving their accounts to a digital-only institution – Marqeta.


The unfortunate delays of modern lending and how your bank can tackle them

Now that we’ve established that digitalization is inevitable, let’s look at how to tackle the transformation.

The lending process for many modern financial organizations is surprisingly prolonged – especially given the current state of technology. Even with banking startups springing up left and right, offering a completely internet-based experience and mobile deposits, the world of retail lending hasn’t caught up quite as quickly.

Online lending is out there, but – even with rapid loan approvals – the time to cash that many modern borrowers experience can drag on for up to nine days. This is true even at banking organizations that offer sleek, secure apps and instant mobile transfers, leaving customers wondering why the lending side of banking is still so sluggish to embrace digitalization.

With so many popular banking features already digitalized, why are there still so many organizations that have neglected automation of their lending processes?

Why do loans still take days to arrive in our bank accounts?

It’s not just time to cash, either. Even though most banks have ditched many of their paper-based systems, loan origination and loan servicing often still require some sort of branch or team member intervention – including some of the most modernized banking organizations in the market.

That’s no way to do business with the technology we have. For traditional lenders, banks and credit unions the delays come from the fact that having digitized the easy things, they are far from automating complex processes like credit decisioning and generally, loan origination.

The processes have too many touchpoints, the originators manually analyze the applications, run checks, evaluate risks, and finally make the loan decision – all using traditional data sources, workflows, and algorithms. Those that haven’t made it that far from the way our parents were evaluated.

It doesn’t take an exceptional mind to understand that digitalization is inevitable. However, bankers are often scared of its alleged cost and time-to-market. Yet with the modern level of FinTech, digital transformation for banks has become easier than we think.

Digital Transformation Solutions For A Bank’s Lending Processes

Unified Lending Management (ULM) is an umbrella term that covers every aspect of intelligent lending processes automation. From application processing, borrower evaluation, and loan origination to underwriting, loan servicing, collection, and reporting. Providers like TurnKey Lender specialize in creating ULM solutions that would be easy to integrate with the core banking system as well as be convenient both for the banker’s staff and the borrower.

TurnKey Lender, for example, offers banks a dedicated Enterprise ULM solution that is tailored specifically to the needs of a large financial institution. The key advantages of this solution are:

  • Unmatched flexibility which allows for meeting any organization’s automation needs. The solution is adjusted and deployed by the TurnKey Lender team and is supported 24/7 to make sure it’s fully operational at all times.
  • Ease of use – the team made sure that the UX and UI design of the system adheres to the latest and strictest standards.
  • Security – the system is built in accordance with the OWASP standards and complies with the ISO 27001 (Cyber Security) and ISO 9001:2015 (Quality Management Systems. Requirements) certifications.
  • Intelligence – TurnKey Lender ULM solution uses advanced deep neural networks to meld traditional and alternative credit scoring approaches. This results in a new level of credit decisioning accuracy.
  • Scalability –  according to an independent analysis by HP, this solution is capable of processing 100 loans a second and more without skipping a beat.

Digital Transformation Services For A Bank’s Lending Processes

Fortunately for borrowers, the current industry standard of multi-day lending finalization is slowly being left behind.

Today’s borrowers want a loan decision process that’s quick, accurate and comes with as little risk as possible. If a bank’s lending process fails in one of those elements, they lose out on more potential customers.

Not only does undergoing a digital transformation make it easier to generate more lending customers, but it also makes life as an online lending business much simpler. From automating debt collection operations to ditching old-school risk assessments, going digital frees up a substantial share of a bank’s financial and human capital.

Particularly in the highly-competitive online lending space, business leaders can use all the cost-cutting and streamlining they can get.

Some of the things you can outsource to your UML solution provider are:

  • Credit Scoring Audit/Adjustment – digital solutions have plenty of ways to evaluate the creditworthiness of a borrower other than their credit history and credit bureau score. Your lending automation provider should be able to analyze your business and work with your staff to come up with and implement the optimal scorecard.
  • Full system integration, testing, and deployment – it’s understandable if you don’t trust any third-party tech staff to even look at your backend. In this case, the solution should be intuitive and professional enough for your in-house experts to customize and implement it themselves. But there should be an option for the provider to do that for you and free you of unnecessary trouble.
  • Program Digitization – having put a lot of effort into lending processes streamlining, you can request digitalization of the existing business processes. In that case, it’s important that the software provider and their solution were flexible enough to tailor it to your needs.
  • Operations Automation – digitalization isn’t just about the borrower’s experience. Your staff and you should also have your lives improved. So the right ULM solution provider will also automate the operations of your lending program, allowing you to cut costs and improve efficiency.
  • Employee Training – new system, no matter how good and intuitive, should come with staff training to make sure your bank uses the digital lending solution to its fullest.


Stay tuned
for more