When lenders choose a suitable loan origination software (LOS), it can significantly boost their operational efficiency, improve customer experience while mitigating security risks and providing a competitive edge.
According to a 2024 study, loan origination systems that incorporate automated workflows, mobile features, and e-signing capabilities can reduce loan processing times by up to 30%.
However, with a plethora of loan origination software providers in the market, how can lenders navigate the choices and select the right solution? In the following discussion, we focus on the nine questions that can help lenders make an informed decision and the right choice. Let’s begin!
Evaluating Loan Origination Software: 9 Crucial Questions to Ask
For lenders looking at improving their operations and efficiency with an LOS, here are some important questions to bear in mind:
Can The LOS Integrate with Existing Tech Stack?
To maximise the efficiency and effectiveness of the loan origination system, it should integrate seamlessly with existing banking solutions. It should be compatible with the existing Customer Relationship Management (CRM) systems and support third-party integrations.
This ensures a seamless flow of data with minimal or no downtime, improving the functionality of the entire lending cycle and better customer data management and risk assessment. Smooth integration with the existing infrastructure saves valuable time and allows other teams to access data when required.
Is The Loan Origination Software Customisable?
When evaluating loan origination software, it is essential to understand if the solution is customisable per the lender’s needs. The LOS should offer no code configuration for changes according to users’ workflow needs.
It should have customisation options, enabling financial institutions to tailor the system precisely to their unique requirements. Lending professionals should be able to configure and customise the software to fit their immediate and future requirements without needing specialised programming skills.
Does The LOS Offer Required Regulatory Compliance Features?
Financial institutions have to comply with the required regulatory guidelines depending on the area they operate in. FIs often function in diverse regions and the LOS they choose must ensure it has the features that help them comply with the specific regulatory guidelines of the area.
Meeting the Know Your Customer guidelines is not only mandatory, but it also helps lenders mitigate the risk of defaults and fraud.
For example, as an end-to-end lending process management and analytics software for high-growth lending and fintech companies, Finezza comes with a Document Identification Framework. It facilitates OCR-based data extraction of KYC documents, helping lenders comply with the KYC norms efficiently.
What Security Features Does The LOS Have?
Data security and privacy are the most pressing concerns for all FIs today. Lenders should find in detail how the loan origination software ensures data security and privacy before making a choice.
When evaluating the software, it is essential to get details about the encryption protocols in the software for data transmission and storage. Multifactor authorisation ensures only authorised users can access specific data and functionalities and is a desired feature in the system.
Comprehensive audit trails help maintain user activity transparency, facilitating accountability and compliance reporting.
What Are The Analytical and Reporting Capabilities?
Analytical and reporting features are integral parts of robust loan origination software as they offer valuable insights that help lenders in strategic decision-making.
A LOS that leverages comprehensive analytics can help lenders understand borrower behaviour, mitigate credit risk, and improve overall portfolio health. Reporting and analytics capabilities of the software help lenders harness the power of data to improve operational efficiency and achieve better results.
When evaluating the software, assess the range of its analytical and reporting offerings.
How Does The LOS Deal With Loan Exceptions?
Loan exceptions occur when an application does not meet the established standards of the lender. A loan origination software automatically approves and declines loan applications based on the guidelines.
However, the traditional assessment tools may exclude some borrowers, especially those with little or chequered credit history. In such cases, additional information is required for an accurate risk assessment.
Instead of rejecting such applicants and losing out on potentially low-risk borrowers, the system could use alternative data sources to make an assessment based on additional criteria. Or, it could refer the application to a specialised credit assessment team.
The LOS that manages these exceptions will help lenders increase their customer base and promote financial inclusion without compromising portfolio quality.
Is The LOS User-Friendly?
Lenders should look for loan origination software with an intuitive and user-friendly interface. The software should allow borrowers and FI staff to navigate the system effortlessly. Customers should be able to find what they are looking for effortlessly, and the employees should be able to use the software without any hassles.
Moreover, the system should be easy to set up and use, contribute to improving the overall efficiency and make for a positive user experience.
Is the System Future Ready?
As technology evolves rapidly, lenders must choose a LOS that is forward-looking. The loan origination software should be compatible with emerging technologies like machine learning, blockchain, and open APIs to help lenders stay competitive.
The solution should adapt and grow alongside the organisation and handle the increase in loan demand without sacrificing performance or efficiency. FIs can seamlessly integrate new users, features, and functionalities without disrupting operations or costly system overhauls as their customer base increases or new products are introduced.
What Is the Total Cost Of The LOS?
Lenders should consider the software’s total cost of ownership, including implementation, licensing, upgrades and maintenance.
As technology evolves, FIs will have to spend on upgrades, and regular maintenance also requires expenditure; lenders should compare options keeping these aspects in mind. Therefore, lenders should weigh the costs against the potential return on investment before finalising their choice.
To Sum It Up
A loan origination software helps improve overall operational efficiency, mitigates risk, reduces turnaround time and enhances user experience.
The questions mentioned above can help lenders choose the best-suited software for themselves. The choice cannot be made based on a single aspect and careful consideration, keeping multiple facets in mind is necessary.
Finezza’s robust loan origination software tool caters to the needs of lenders and helps provide a better customer experience. Features like easy integration with APIs, 360-degree customer profile assessment, superior threat detection and more make it the perfect choice.
Call us now to learn more!
Leave a Reply