Coding is an integral part of many everyday transactions and interactions for most people. It powers activities ranging from making payments on E-commerce sites, booking a cab, or using Bluetooth in the car.
As per an IBM Institute for Business Value report, 92% of executives agreed that their organisation’s workflows would be digitised and use AI-enabled automation by 2025.
As coding becomes pervasive across industries and sectors, its impact has been the most profound in the financial sector.
In the digital lending landscape, coding offers numerous benefits to lenders by helping them automate and streamline the steps in loan processing and develop comprehensive and personalised loan management systems. Let us explore in detail.
Benefits of Coding in Loan Management Systems
A Loan Management System is a digital tool to help lenders automate and streamline the loan life cycle, beginning from the onboarding stage and going on to the monitoring and repayment stage.
Apart from streamlining the process, LMS also helps lenders with valuable insights and analysis for loan monitoring, provides comprehensive reports, and helps in compliance.
Below are four examples of specific functions where coding helps lenders improve their functioning:
1. Customer Onboarding
Coding helps make the onboarding process faster and more efficient. It helps extract loan application data from the lender’s database and calls for additional data from third-party service partners. Customers also benefit from this streamlined process; the loan processing is faster and more customer-friendly.
2. Credit Scoring
Coding enables the creation of more accurate credit scoring models by automating data collection and analysis. Collecting data from alternative sources and analysing large volumes of data manually is challenging and time-consuming, but automation makes it possible.
3. Loan Portfolio Management
Coding also allows lenders to develop loan portfolio management tools, which assist lenders in tracking and managing their loan portfolios more efficiently. With coding, the risk of errors is reduced, and customers can get quicker access to their loan statements and responses to their queries.
4. Loan Calculators
During the loan application stage or even before applying, applicants can benefit from using loan calculators to check their monthly instalments for a particular amount they may desire to borrow. Loan EMI calculators help customers assess if they can pay the instalments comfortably or not. Developing these customer-friendly and helpful tools is possible through coding.
Impact of Coding in Loan Management System Development
Coding is the cornerstone for designing a robust loan management system. Choosing a well-designed and robust LMS is critical for a lender; well-coded software allows the lender to automate the entire lending process. Here are some important aspects:
1. Balanced Credit Risks
Coding enables the development of automated risk assessment models that leverage artificial intelligence (AI) and machine learning (ML). These models assess the risk associated with each application quickly and more accurately. Data-driven decisions help lenders avoid high-risk applicants without denying a loan to eligible customers and allow them to balance their credit risks better.
2. Enhance Efficiency and Accuracy
Lenders can automate most manual tasks related to loan processing by employing loan management systems. Automating steps like collecting applicant information, interest calculation, and loan document generation helps reduce errors and time taken and improves overall efficiency.
Finezza’s Loan Origination System offers Automatic Document Identification, which helps with data extraction of KYC documents, making the process more efficient.
3. Simplified Compliance
Lenders have to meet various regulatory guidelines and submit timely reports as per the policies laid down by statutory bodies. Coding also makes compliance easier for lenders.
Automation helps in timely and more efficient compliance by automating report generation, deadline tracking and monitoring regulatory changes.
4. Improved Borrower Experience Through Loan Management Systems
Coding improves the overall borrowing experience and empowers the customer with convenient self-service portals and prompt credit decisioning.
Eligibility and loan calculators help customers gain better insight into the loan approval process, and they can make more informed decisions about how much to borrow.
Applicants can track their loan application status, pay online, and choose from available payment options as per their choice.
5. Better Insights Into Loan Portfolio
Comprehensive loan management systems offer valuable insights to lenders into their loan portfolios. It helps them identify trends in delinquency rates or customers who are a default risk, and better NPA management. Lenders can make better decisions about lending practices and risk management using these valuable insights.
The Future of Loan Management Systems and Coding
Coding has enabled fintech companies to innovate and introduce products and services through advanced loan management systems, often challenging traditional banking channels.
Coding is also helping fintech become more accessible to people through the internet and mobile devices. Fintech and NeoBanks do not have to bother about compliance-related issues or complicated organisational hierarchies, which makes them agile and quick to innovate.
Innovative digital solutions like the Loan Origination System help fintech collaborate with banks and create a symbiotic relationship. Fintechs have to partner with banks owing to the licensing and regulatory requirements; banks gain from these partnerships through growing their customer base, and customers benefit from last-mile penetration and personalised products.
The Loan Management System software can help manage NBFCs and banks collaborate and offer ingenious solutions through the co-lending model, introduced by the Reserve Bank of India (RBI)
Finezza offers comprehensive solutions to help lenders improve their performance and operations with the help of well-coded, robust tools.
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