The lending industry has become extremely competitive over the last few years. Traditional players such as banks and non-banking financial companies (NBFCs) have undergone digital transformation to keep pace with demand and unlock new opportunities.
Several digital banks, neobanks, digital lending apps, and peer-to-peer lending platforms have mushroomed to make credit more accessible to a wider spectrum of individual and business borrowers, such as micro, small, and medium enterprises (MSMEs). Today, even non-financial businesses offer their customers credit.
In such a competitive lending landscape, lenders must bring more efficiency and accuracy to the entire lending life cycle to help optomise operations. Those who do so have a greater opportunity to gain market share.
This is where an automated Artificial Intelligence (AI)-driven lending lifecycle management solution can help lenders drive revenues and profitability. In this blog post, let’s explore the lending life cycle, the urgency of automation and its key benefits.
What Is A Lending Life Cycle?
The lending life cycle is the end-to-end process from the time a borrower applies for a loan till the time it is paid off. The various steps in the lending workflow can include pre-qualification, submission of a loan application, loan origination process, underwriting or risk assessment stage, disbursement of the loan, collections, and loan closure.
Each step demands diverse resources and skills – from data entry and analysis of financial data to the customisation of loan products.
As lenders attempt to scale their businesses, access to end-to-end lending lifecycle management solutions is helping them optimise their efforts.
What is a Lending Lifecycle Management Solution?
This loan processing system automates every step of the lending life cycle. The innovative solution leverages a mix of technologies such as cloud management, AI, Machine Learning, and optical character recognition (OCR) at various stages.
The usage of lending management solutions adds more efficiency, accuracy, and speed to the entire lending process. As a result, lending businesses can run their entire operations streamlined and transparently through a single, cloud-based, unified interface.
Also, it comes with many advantages that have a long-term impact on the sustainability and profitability of lending businesses.
Benefits of Automating the Lending Life Cycle
Digitising the lending life cycle, with a combination of cutting-edge technologies is helping lenders drive their business outcomes more effectively. Here is a snapshot:
1. Higher efficiency
The entire lending life cycle becomes completely automated, eliminating the need for physical paperwork and human data entry requirements, thus reducing the potential for errors. Such a solution has the capability to recognise data in over 700 file formats.
It can segregate all financial transactions into inflow and outflow categories and further segment within minutes. Human bandwidth can be leveraged in tasks of higher value instead of manual tasks.
2. Accurate Underwriting Processes
A lending life cycle management tool can process large amounts of financial data within minutes. It enables lenders to make their underwriting operations more efficient in terms of speed and accuracy with limited intervention.
Dashboards can be customised to segregate all transactions into specific categories such as revenues, salary payments, loan repayments, and beyond.
3. Enhanced Fraud Detection Capabilities
Lenders are increasingly vulnerable to loan fraud due to the use of sophisticated methods and technologies to fake transactions and documents. For instance, borrowers may have indulged in circular transactions to boost their perceived trade value or business valuation to impress an investor.
Such transactions may not be visible to the human eye. However, AI-driven automated loan management systems are equipped to detect irregularities and patterns across a large volume of financial data.
It can also recognise fraudulent documents and fake identities by detecting seemingly minute inconsistencies in data. This level of competency makes it an invaluable asset to today’s lending businesses.
4. Data-driven Decision-Making
Lenders need to make important decisions based on the financial data at hand. The usage of lending lifecycle management tools simplifies the process by offering comprehensive data analysis to help make decisions.
For instance, it offers a financial creditworthiness score that helps lenders put a tangible value to a borrower.
This mechanism is much more accurate than using existing credit scores, which paint an incomplete picture. For instance, bootstrapped, first-time borrowers can benefit from this feature, which paints a thorough picture of their financial health, which may be good even if they have no credit history.
5. Customisation of Products
Access to the right also helps lenders customise products for borrowers based on their real-time needs instead of offering one-size-fits-all products.
For instance, the loan ticket size, repayment schedule, tenure, and interest rates can be tailored to suit a business’s needs. However, the loan lifecycle management system makes recommendations, which expedites the process.
6. Speedier Loan Turnaround
Borrowers today seek a simplified loan application process and turn in loan approvals. Those that can deliver on these goals will corner the market. Lending lifecycle management tools help streamline the entire process, thus allowing lenders to bring down turnaround time. This leads to quicker conversions and repeat borrowers.
7. Cost-effective Operations
Lending businesses can function with lean teams. They can expedite the lending life cycle, serve more customers, and deliver relevant products. A combination of these shifts results in lower costs and higher revenues, thus fostering cost-effective operations.
8. Scale The Business Faster
With access to an automated lending lifecycle management solution, lenders can bridge the gaps in their tech stack. They will be in a position to grow their business faster, serve a diverse range of customers, increase lifetime customer value, and boost profitability.
Many lenders believe that making the underwriting process more accurate and efficient is the key to profitability. However, the answer to optimising finances is to automate the end-to-end lending life cycle.
It must start from the time the loan applicant enters the lender’s ecosystem, offering them a seamless, superior, efficient user journey as a borrower.
The adoption of automated lending lifecycle management solutions can facilitate this process. This approach gives lenders an advantage in a competitive credit landscape.
Finezza offers a comprehensive set of tools and solutions to manage your lending portfolio. Our end-to-end lending management and credit evaluation solutions are trusted by brands like ftcash, Hiranandani Financial Services, gromor Finance, and UC Inclusive Credit, to name a few.
Finezza’s intuitive bank statement analysis software is geared to analyse bank statements with speed and accuracy and detect potential fraud.
Book a demo to know more.