The lending process right from origination to approval, disbursal, and complete lifecycle management is complex and fragmented. The traditional loan processing often undertaken manually is consuming and cumbersome.
Times have changed, and so has technology. If you want to reach the next level of growth, you’ve got to adapt to the newer trends where speed and efficiency define success.
Here are some of the top challenges faced by lenders around the world:
Common Challenges Faced by Lenders
There are several challenges in the traditional loan process:
- Lending involves processing documents that can often run into several pages. Manual scanning is not only time-consuming but also prone to errors.
- Each loan and credit product available today has a different workflow and underwriting requirements. Legacy processing can cause overlapping, confusion, and inefficiency to creep in. It will also escalate the cost involved in processing.
- Applicants have to deliver documents to the lender for traditional loan processing. If documents are incomplete or not delivered to the right person, it means several visits to the lender, causing delays and frustration for both parties.
- Verifying and checking customer credentials is a cumbersome process. Even a minor error can have serious repercussions.
- The loan origination and loan lifecycle management involve several stages, with multiple people handling each step. Data inputs from several sources and a long chain of communication may cause snags and data integrity issues.
- Security and compliance issues may arise for the lender when documents with sensitive financial information are transferred from one department to another.
- Management may not be able to optimise resources due to a lack of visible workflow and cases in pipelines.
- The traditional loan process does not follow a standardised approach leading to increased exposure to error and negligence.
As you just saw, throughout its several steps, the legacy lending processes are susceptible to delays and errors, causing disappointment in customer experience.
Why Automated Lending Software is the Future of Lending?
With bank accounts available in a few clicks, a long-drawn loaning process cannot meet customer expectations, leading to lesser turnaround times.
In today’s time of instant gratification and quick services, most customers expect a faster and simplified solution to their loan needs so they can devote time to actual business.
As per a report, the global lending market has attained a value of almost $6,875.4 billion in 2019, having increased at a compound annual growth rate (CAGR) of 4.9% since 2015. The market is expected to grow at a CAGR of 5.5% from 2021 and reach $7,929.0 billion in 2023.
How Can Automation in Lending Help Banks & NBFCs?
Automation and digitisation are critical to improving accuracy, increasing efficiency, and scaling the lending operations.
With the right loan origination and loan lifecycle management software, lenders can process loan applications, track, and verify documents, secure data, automate workflows, and accelerate loan approval and disbursal process.
This means, the entire process will be smoother, less prone to human errors, faster, and satisfying for both parties.
Read on to know how the adoption of automated software can benefit in increasing efficiency and scaling your lending operations:
Collaboration and Ease of Access
Automated solutions allow easy access to enhance collaboration anywhere through internet connectivity to ensure seamless communication. The software enables real-time updates so that lenders can quickly respond to queries. It is also leveraging the power of mobility to reduce management and overhead costs.
Capacity Planning and Scalability
Lending software makes capacity planning and staffing more agile. It enables adding features to the platform quickly to meet the expanding volume of loan applications without the need to invest more in IT infrastructure.
Document Storage and Sharing
The vast number of documents involved in the loan process is often the reason for delays and errors. If the documents have been updated, then several different versions may cause further confusion. The software provides enhanced storage space for all documents needed during the lending operations.
Enhanced Role-Based Access and Features
Lending software can help to reduce confusion and to improve security. Since the entire data of the loan applicant is located centrally in the software and updated in real-time, the lending company can allocate role-based access to its staff. It will ensure that each employee will have access to view and edit only the information they need to complete the workflows.
Less Investment in the Long Run:
As per a report, lending institutions can save as much as 22 % by implementing a lending software. Lending institutions will not need to purchase additional servers, hardware, or other infrastructure to start using the lending solution. There is minimal time and cost involved hence eliminating the need for a large IT team. Having a lending software allows the lenders to predict the budget and other expenses while reducing overhead costs.
Automatic and Real-time Updates
Lenders can ensure fast performance and scalability, giving them a competitive edge over others when they integrate software-based lending solutions into their repertoire. With the adoption of lending software, companies can be assured of being future-ready. Lending software is automatically updated with SaaS subscriptions.
Security and Data Protection
Data security is the primary concern when sharing sensitive data primarily related to financial history and other information related to loan applicants. Lending software solutions allow us to keep up-to-date security protocols without breaking the bank literally.
To sum up
Adopting a lending software can lead to increased profitability, better and enhanced customer experience, lesser errors, reduced overhead costs, improved security, and accelerated loan application approval processes leading to more business.