When spreadsheets were first launched in 2006, this brand-new innovation revolutionised the way businesses processed and stored financial data. In particular, financial institutions benefit because spreadsheets automate several tasks
With the acceleration of digital transformation over the last three years, the amount of data being generated has increased exponentially. For instance, the number of digital transactions has risen significantly in the last few years.
India topped the list in 2022 with 89.5 million transactions. Brazil and China followed with 29.2 and 79.6 transactions, respectively.
As the volume of transactions increases, it becomes more challenging to process financial data comprehensively and securely.
Lending businesses, in particular, are finding it challenging to stay efficient and value-driven with continued usage of spreadsheets, especially as they scale.
This is where the adoption of cloud-based, AI-driven loan management software can help lenders transform their operations and offer superior service to borrowers.
What Is Loan Management Software?
The lending process involves multiple steps, from loan origination and underwriting to loan disbursal and collections. Loan management software enables lending businesses to automate the loan management workflow from end to end completely.
This financial analysis and loan management tool leverages multiple technologies such as cloud computing, Artificial Intelligence (AI), Machine Learning (ML), and robotic automation to help bring efficiency and accuracy to lending processes.
Loan Management Software Vs Spreadsheets
Loan management software and spreadsheets differ in several ways.
Spreadsheets enable the storage of data through the maintenance of payments and other types of data. They also enable financial calculations of various types of financial data and management of escrow processes.
However, spreadsheets are not equipped to provide in-depth analytical data insights, automate grunt work such as data entry, and enable higher-value outcomes.
On the other hand, superior loan management software is a single, unified platform that automates several processes across the entire loan management cycle. It has the following capabilities:
- In-depth and accurate analysis of financial data
- Processing and disbursements of multiple loan types
- Flexible repayment frequencies and payments module
- Dynamic loan document generation
- Bank payment reconciliation
- Non-Performing assets management
- Efficient waivers management
Advantages of Loan Management Software
Here’s a look at the transformative impact of loan management software
1. Complete Automation of Loan Management
Loan management software automates every aspect of loan management operations. For instance, it enables the automatic digitisation of over 700 formats of information, in-depth financial analysis of all banking and financial data, underwriting, loan disbursal, and monitoring. All repetitive tasks are automated, reducing the potential for omissions, errors, data leakage, and duplication.
2. Superior Risk Assessment
One of the top challenges for lenders is to bet on the right borrowers who will repay the loans on time. This is where accurate risk assessment is key to success.
AI-powered automation enables lenders to accurately categorise all transactions into over 20 inflow categories and 30 outflow categories and come up with a creditworthiness score based on real-time cash flows.
Borrowers with stellar credit histories, as well as first-time borrowers, have equal opportunities to secure loans based on their business performance.
3. Enhanced Fraud Detection Capabilities
The potential for loan fraud is another top concern of lenders. Spreadsheets cannot detect irregular, usual patterns, which can translate to fraudulent transactions, such as circular transactions, for instance.
However, AI-powered loan management software can recognition irregular patterns within minutes, inconsistencies in fake loan documentation, as well as potential identity theft.
By enhancing fraud detection capabilities, lenders can avoid investigations, which can tarnish a business’s reputation and even result in a potential shutdown.
4. Customised Solutions
One of the most unique and value-driven benefits of adopting loan management software is that it recommends customised solutions based on a borrower’s transaction patterns. Thus, it offers solutions that are relevant to diverse customer needs.
It is impossible to replicate these personalised solutions at scale and speed with purely human interventions. This software also enables lenders to offer flexibility to borrowers who are struggling with repayments by offering intuitive solutions. This approach increases affordability, flexibility, and convenience for borrowers.
5. Automates Compliance
Regulatory guidelines for the lending industry are becoming more stringent to reduce the occurrence of non-performing assets and loan fraud. The adoption of loan management software enables lenders to apply new compliance guidelines at scale by customising dashboards as needed.
Automating compliance reduces risks of violations and penalties. It brings in efficiency.
6. Increased Efficiency
While the market demand for loans keeps increasing, especially in the micro, small, and medium enterprise (MSME) segments, lenders need to become more efficient if they aim to scale. The use of loan management software enables quicker loan approvals with customised recommendations and higher efficiency in compliance.
Businesses can also automate the collections process, which uses multiple creative mechanisms, especially when dealing with businesses that are struggling with repayments. Businesses can function speedily, be more inclusive in their loan coverage, capture more market share, and drive revenues.
7. Cost Savings
Besides driving revenues, lenders need to run cost-effective operations to become more profitable. By using loan management software, lenders can function with lean, hybrid teams.
For instance, businesses no longer need to hire data entry operations since the process is fully automated. Team members can play a more strategic role and reduce manual interventions.
8. Superior Data Insights
Loan management software comes equipped with AI-based predictive analysis engines, which enable lenders to predict future trends. Businesses can shift to a data-driven decision-making culture.
They can introduce relevant products in response to trends and get very strategic when making key business decisions.
Key Takeaway
Lending businesses that are looking to scale quickly, become more inclusive, and capture larger market share will struggle to do so if they continue to use spreadsheets as their key loan management engine.
AI-powered solutions such as loan management software can help automate processes end-to-end, freeing up human bandwidth to focus on higher-value tasks. Businesses can grow all-around efficiency, offer customised solutions, and drive revenues by delivering higher value to borrowers.
Finezza, the cutting-edge micro loan management software, streamlines lending processes. It automates applications, credit assessments, and approvals, ensuring security and compliance. It harnesses AI technology to provide tailored analytical solutions, enhance loan decision-making, reduce lead-to-loan time, and effectively evaluate creditworthiness for faster loan approvals.
Sign up to learn more about Finezza and revolutionise your financial operations with advanced technology.
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