What’s in it for me? That’s a legitimate question for every lender to ask when evaluating the features, capabilities, and benefits of digital loan processing. We’ll answer that question with three compelling reasons. First, you need digital loan processing to remain competitive. Second, it lets you improve lending efficiency continuously. Third, it makes it easier to comply with the many federal and state regulations that govern lending.
Digital Loan Processing Helps Lenders Compete
Amazon, Uber, Spotify, Youtube, and Netflix have set customer expectations for ease of use and transaction efficiency. In comparison, most industries trail behind. According to The American Banking Journal, on average, banks can handle about 7 percent of their products digitally from end to end. In a 2016 Federal Reserve survey, almost half the respondents complained of the difficult application process and the length of time required to receive a credit decision. Fintech companies recognize the need to deliver a better customer experience, and are now focused on transforming the auto retail industry.
Underlying this transformation are technology advances that change how we experience the physical world. Once you turned a page. Now you can swipe. Once you bought a compact disc. Now you can download. The difference is digital technology. The same holds true for the lending industry. The cloud is one of the greatest enablers of industry transformation PWC’s World Fintech Report 2018 confirms cloud benefits for the financial industry. The technology has simplified software licensing, implementation, and updates. It scales easily to accommodate geographic expansion or business growth. In comparison to legacy lending systems, it offers capital and operational savings for lenders. To obtain the greatest benefit from digital loan processing, your system must be cloud-based.
Continually Improve Lending Process Efficiency
With fully digital lending, there is no paper. Automation replaces manual tasks. Rules enforce credit policies. Nearly every aspect of your lending practice can be analyzed to tell you what’s working and what’s not. Digital loan processing can immediately and continously improve lending efficiency to keep you competitive and profitable.
Three of digital loan processing’s key capabilities are digital communications, automation, and analytics. Each plays a critical role in helping you make better quality lending decisions and improving process efficiency.
- Digital communications eliminate paperwork.
- Digitize paper loan origination documents to eliminate the cost and delay of mailing loan origination documents.
- Eliminate lost or misplaced documents that delay decisioning.
- Streamline the underwriting process, making all documents easily and securely accessible to underwriters.
- Capture all lender-borrower communications, including notifications, email, text, and paper to create a complete, chronological, secure, and defensible digital communication history.
- Automation accelerates all phases of the lending cycle
- Replace manual underwriting and funding processes with data-driven workflows that automatically and consistently move the application and all associated lender data through the loan cycle—origination, underwriting, funding, and servicing.
- Employ decision rules to accurately implement credit policies, consistently evaluate applicant attributes, assess creditworthiness, and calculate loan terms.
- Automatically access traditional bureau and alternative credit sources via cloud integration. Consolidate credit information into a normalized, standard scorecard that is easily understood by an underwriter and can be automatically evaluated by decision rules.In addition to accelerating loan processing, automation relieves lending professionals from the tedium of reviewing data and make decisions that are best done via workflow and decision rules. This allows professionals to focus time and skills on areas of loan processing that truly require human expertise, such as borderline qualifications, stipulations, exceptions, and overrides.
- Analytics enables continuous process improvement and portfolio insightIn a digital loan process, all borrower data, documentation, and communications are captured and stored in the system. The system also continually gathers performance data about your loan processing. Together, these data can be analyzed to provide summary and detailed insight regarding process efficiency and portfolio performance. With the proper analytic tools you can find answers to the following questions, and act upon them to fine-tune credit policies, identify areas of process inefficiency, and determine which factors positively or negatively impact portfolio performance:
- Are you meeting your response time SLAs for individual dealers?
- Who are your most/least productive underwriters?
- What is your look-to-book ratio for the week/month/quarter?
- Are there common attributes of applicants who decline credit offers?
- What is the distribution of applicants across the FICO ranges?
- How many subprime borrowers defaulted this quarter?
- Which applicant attributes most closely correlate with 90-day delinquencies?
- How many overrides were made this quarter? What were the reasons?To obtain the greatest benefit from analytics you’ll need to regularly evaluate process and portfolio performance, comparing current results to past results. What are the results of credit policy modifications you made a year ago? Are you showing improvement or decline with respect to risk, profit, or loss? With a digital loan process, analytics can be the most powerful tool for remaining competitive and profitable.
Invest 60 minutes to learn more how data, automation, and analytics can Streamline Your Credit Program.
Comply with Federal and State Regulations
Compliance weighs heavily upon lenders in the auto industry. You are governed by federal and state regulations. They are numerous and subject to change as a result of industry lobbying and government oversight. Regulatory compliance requires legal guidance regarding the interpretation and application of regulatory statutes and a sustained effort by every employee.
Digital communications, automation, and analytics help you comply with lending regulations with:
- Digital documents that provide a secure, complete history of lender-borrower communications that, in the event of an audit, can easily be accessed;
- Detailed, accurate, and current applicant information that includes both bureau and alternative credit data, enables better-informed lending decisions that minimize risk of disparate impact. This information also improves your ability to provide credit to previously overlooked market segments;
- Workflows and decision rules to implement the directives of relevant federal and state lending regulations. They guarantee that processes and decisions are data-driven, executed fairly, accurately, and consistently, greatly reducing the risk of disparate impact; and
- Analytics that let you monitor your lending processes to ensure they comply with regulations, and help identify potential areas of concern, such as a spike in exceptions, overrides, or declines.
Be Competitive and Compliant with Digital Loan Processing
What’s in it for you? Digital loan processing has much to offer. A cloud-based lending system employs the latest technology to eliminate paper, make consistently better and faster lending decisions, continually improve lending process efficiency, and comply with federal and state regulations. In an industry being transformed by fintech innovation you need digital loan processing to be competitive, profitable, and compliant.
defi SOLUTIONS offers a cloud-based system for digital loan processing. It’s quick to implement and provides powerful analytic capabilities to monitor process efficiency, portfolio performance, and regulatory compliance. Contact our experts, or schedule a demo to see how digital loan processing can help you achieve greater efficiency in your lending business.