“Speed, transparency, and experiences have always been strong determiners driving customers’ loyalty in the lending business. Unable to measure their loan origination process in line with such metrics and more so in the post COVID world, the traditional lenders are stepping out of their comfort zones to build digital lending solutions.”
The lending business is no more the same post-COVID-19. With the pandemic leading to economic slowdown worldwide, a liquidity crisis is imminent, and lenders fear an increase in credit costs. Moreover, the COVID-19 crisis has highlighted the digital divide forcing the traditional lenders to feel the moment’s heat.
Given the current world scenario, amidst layoffs and historical increase in unemployment caused by the pandemic, the demand for loans ought to spike. Not only larger financial institutions, but even the microfinance services providers are sure to feel the pressure on their operations. According to recent data, the United Kingdom recorded a GBP 1.22 Billion increase in consumer credit in July 2020, registering a first-time gain since February 2020.
Every time a great recession hits the world, credit businesses have a larger role to play in specific. And we have witnessed it in the years after the great recession of 2008-09. In the current state, when governments are lifting lockdowns:
- Confidence in the economy will reinstate.
- New employment opportunities will generate.
- Businesses will lean on credit to make a fresh start.
A paradigm shift in the lending pattern awaits. As the need for credit swells, speed, accessibility, and experiences will be the key differentiators for attracting customers. The following are some of the essential questions that lending organisations’ should be asking themselves.
- Are your credit products and services accessible anywhere and anytime?
- Are you making your business available 24*7 to customers across platforms?
- Do you leverage FinTech solutions to accelerate your loan origination process?
- Does data drive your loan sanction decisions?
In the present circumstances, Implementing digital lending solutions would certainly be a wise decision to make. As customers become tech-savvy and need to operate remotely becomes the new normal, it is safe to conclude that tech-enabled loan services providers are going to have the last laugh. According to a Global Digital Lending Platform Market (2019-2025) report, the global market for digital lending platforms will reach over GBP 9.12 Billion by 2025.
7 Benefits of Digital Lending Solutions
Advanced digital lending platforms help lenders harness FinTech solutions and redesign their lending business models.
Digital brings along disruptive technologies, data-driven decision making, proven methodologies, and unique approaches that help financial institutions, including microcredit providers, foster a robust lending environment. Let us look at the seven key benefits of digitising the credit processes and learn how loan origination software helps your lending business stay ahead of the curve.
- Reduce Loan Management Time
A digital platform helps lenders maximise the operational efficiency leveraging FinTech solutions. Technologies take the forefront to accelerate the workflow by helping you achieve end-to-end credit-lifecycle automation and making you free from manual-and paper-based tasks. Besides, cloud-based lending technologies and AI-powered loan approval processes add agility to every different stage of the loan origination process, right from processing application, receiving online registration, documentation, verification to disbursement and recovery of loans. It won’t be wrong to say that digital lending platforms reduce the loan origination process from weeks to hours and help attain complete consistency and accuracy in the loan underwriting process.
- Reinvent Credit Lending Journey
Digital allows your credit services business to perform tasks, initiate actions, and function in a connected ecosystem. The ecosystem brings together credit unions, insurance companies, savings and loan associations, banks, and helps you expedite financial decisions. With digital lending solutions, lenders can create bancassurance models to collaborate with industry peers to increase their customer outreach. They can leverage SaaS (Software-as-a-Service) solutions and API-integration to develop new and innovative solutions. Besides, lenders can have online platforms to widen their alternative lending space to encourage new finance models such as peer-to-peer lending, crowdfunding, marketplace funding, etc.
- Create a Consolidated Data Environment to Mitigate Risks
Conventional lending models have a fragmented data architecture that weakens the decision-making ability of loan services providers. On the contrary, digital lending platforms converge the disparate data source and improves visibility by providing a centralised platform through a dashboard. Digitising loan origination processes make it quick and seamless for the lenders to analyse loan enquiries, access the loan applicant’s credit file, calculate the cost of risks, and perform other required preliminary checks. They can instantly perform affordability analysis on loan applicants or assess delinquency possibilities, and thus, curtail loan default risks.
- Deliver Improved Loan Experiences
Customer experience has now become a key brand differentiator. An article in Forbes informs that bad experiences can be a strong reason for 32% of your customers to drift away to competitors. The digital-age loan applicants demand freedom from all the conventional limitations; time, speed, accuracy, or accessibility. Digital lending solutions ensure 24*7 availability of your business across platforms and devices. It helps you devise AI-enabled chatbots that respond to loan enquiries even during non-business hours and offers human-like, natural conversational experiences. Therefore, experiences directly encourage customers to place their trust in a brand.
- Achieve Efficiency and Cost Containment
Believe it or not, it’s a fact that if data is well optimised, it helps in cost containment. Digital tools optimise the enterprise-wide data to help lenders pursue data-driven growth. It deploys disruptive FinTech forces such as IoT (Internet of Things) to connect devices using sensors and analytics to mine through all the loan origination stages and extract useful insights. A loan origination software run analytics through the data to turn it into the most valuable assets for lenders. According to a Fortune Business Insights report, digitising the process enables the lenders to save 30% of the costs. It will help loan services providers better understand the lending analytics that drives their performance with actionable insights.
- Ensure Complete Compliance
Being compliant with regulatory standards is another factor that helps lenders build their brand identity. Digital channels ensure that you strictly follow the GDPR (General Data Protection Regulation) guidelines and comply with the standards laid down by FCA (Financial Conduct Authority) and PRA (Prudential Regulation Authority), the financial regulators in the UK. Complete compliance enables lenders to win customers’ trust and ensure fair lending practices, which is key to improving brand credibility and gaining customers’ loyalty.
- Improve Accessibility, Transparency, and Satisfaction for Customers
Digital lending platforms virtually have no waiting time while delivering customer services. With traditional lending procedures, consumers need to visit the financial institution’s respective branch — they wish to borrow a loan from — for availing the different services. Such is not the case with digital lending platforms, which allow lenders to keep products and services at the customers’ fingertips. From applying for a loan to checking its approval status, from downloading loan statements to studying the applicable rate of interest, customers can perform the different tasks anytime and anywhere using their smartphones and laptops, for instance, and that too at a time convenient to them.
Lean on Digital Lending Platforms to Augment Performance and Unlock New Opportunities
Lending services providers need digital acceptance and technology commitment to maximise the benefits of the UK’s high loan business prospects.
As early digital adopters could change tracks and shape response to COVID-19 impact with speed, more traditional lenders are approaching digital transformation partners like Kellton Tech to build a technology roadmap. Adding a digital system will help evaluate and monitor risks in the lending space more efficiently. Lenders can lean on digital to put all the success metrics right and safeguard their loan business from crises such as COVID-19.
Considering the demand, the level of volatility in the market, and the challenges underlying, every prudent lender should be mulling over forging a comprehensive digital strategy to reconstruct and monitor every stage in their loan origination process. Digital lending solutions enable credit providers to untangle twists and turns in the credit conditions, unlock fresh opportunities, and play their role efficiently in bringing financial stability in the economy.