The Indian financial ecosystem is witnessing rapid changes thanks to the increasing demand for technology integration into conventional financial operations.
Traditionally, although most banks and other financial institutions claimed to offer top-notch customer service and experiences, the reality painted a different picture.
Despite these reassuring claims, banks were gradually – for the wrong reasons. The problems? Long queues for routine tasks, frequent branch visits to fill out various forms, week and even month-long waits to secure loans and a need for streamlined customer support channels.
As a result, customers were exploring other alternatives to avoid these barriers, offering fertile grounds for non-banking financial companies (NBFCs) and Fintech companies to capitalise on the situation.
This article delves into the transformative impact of digital advancements on loan origination systems. It highlights how the entry of innovative Fintech companies and startups, coupled with evolving consumer behaviours, is revolutionising the lending landscape.
Loan Origination Systems: Accelerating Digital Lending
Modern loan origination systems offer a clear understanding of a borrower’s financial performance and fast-track loan documentation and ensure they comply with relevant regulatory and legal compliances.
In the past, securing loans could take a few weeks and even months, making it a cumbersome affair for borrowers. The advent of technology, the surge in the number of NBFCs and the increasing push toward enhancing the customer experience have trimmed that time to a few minutes.
Let us elaborate on how loan origination systems enable lenders, especially NBFCs, to provide spotless customer experiences and help customers secure loans without any delays.
1. Accurate Customer Segmentation for Faster Loan Approvals
NBFCs have managed to amass significant popularity in India due to the prevailing credit availability gap, particularly for small to medium-sized enterprises (SMEs) and other underserved customer segments.
However, new-age and advanced Fintech startups are gradually marking their presence in the lending sector with aggressive marketing, innovative product offerings, and a focus on customer convenience. The increasing number of digital lending platforms and channels makes it even more crucial for NBFCs to up the ante and embrace the customer-first approach.
One way to do that is by optimising their sales cycles and reducing the turnaround time for loan applications by harnessing loan origination systems. Customer segmentation has remained one of the biggest hurdles for NBFCs and other lenders due to insufficient customer data.
- Loan origination systems address this issue by allowing lenders to segment their customers based on different factors, including
- Income
- Loan amount
- Spending patterns, and more
- Segmenting customers paves the way for faster loan approvals, offering lenders insights into which documents are required for which customer segment and more.
2. Improving Operational Efficiency
Loan origination process is not as straightforward as it seems. It involves multiple steps, including:
- Lead management
- Loan documentation
- Background checks
- Compliance
- Loan disbursal
The legacy systems are not only ill-equipped to expedite loan applications but also error-prone and manual, making them less favourable in comparison to the sophisticated and modern loan origination system.
Additionally, as more and more customers look for convenience and fast loan approvals, it appears that legacy systems may need urgent overhaul aided by loan origination systems.
3. Document Management
One of the major and probably the most important applications of loan origination systems is document management. These include deeds of trust, promissory notes, and several other documents for borrowers and lenders.
Before the arrival of loan origination system, lenders relied on templates to create the mentioned documents, leaving room for inadvertent errors. Additionally, the process was time-consuming, affecting the lender’s bottom line and unsatisfied customers.
Loan origination systems replace manual loan documentation, ensuring a range of benefits such as regulatory compliance, swift and accurate document generation that aligns with the borrower’s profile and requirement, and more.
Apart from generating documents accurately, loan origination systems also help lenders store and manage all the documents efficiently. This eliminates the burden of storing documents in hard format.
4. Simplifying the Life of Non-credit Trained Credit Officers
Loan processing is incomplete without credit officers. They oversee several critical aspects of loan processing, including underwriting, making final credit decisions, and more. In short, lending and other financial institutions require credit officers for timely and error-free loan processing.
However, credit officers may not be available at times, creating resource constraints and slowing down the entire process. A loan origination system can resolve this issue by empowering non-credit-trained employees to process loan applications without any difficulties. This allows lenders to process loans even when credit officers are not available or occupied with other critical tasks.
Parting Notes
Loan origination systems have quickly become one of the most critical components of a loan processing application as they bridge the gap between borrowers and lenders. These systems facilitate streamlined loan origination right from when the application is submitted to loan disbursals.
At present, lenders need to go above and beyond to serve their customers, minimise turnaround times for loan approvals, and stay relevant.
Finezza’s cloud-based, all-in-one loan origination solution is developed to cater to the evolving needs of lenders who are looking to establish a solid foothold in the lending space and aim to offer a spotless customer experience.
Our robust tool is packed with several features, including automatic document identification, credit assessment tools, threat detection and more.
Book a demo today to learn more.
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