Information technology (IT) has transformed the way modern lending works. Fincos, banks, and credit unions have access to more lending solutions than ever thanks to the latest advances in technology. From cloud-based loan origination software (LOS) to predictive data analytics, you can do more when you invest in modern lending systems.
How should you prioritize your IT spending? With so many options, it’s hard to determine which will deliver the greatest return. Prioritize functionality and capabilities that address your lending needs.
Based on our work with lenders, if you want to streamline your lending process, consider these three upgrades:
- Migrate to a cloud-based LOS;
- Take advantage of data analytics; and
- Incorporate relevant software as a service (SaaS) lending capabilities.
IT investment is a necessary part of any lender’s budget. These three improvements will give you the biggest bang for your buck.
Migrate to a Cloud-Based Loan Origination Solution
If you aren’t already using a cloud-based LOS, then this should be your first priority. There are too many benefits to ignore, including:
- More efficient data management: Maintaining all of your origination data in the cloud allows you to organize and analyze it more efficiently. Cloud provides lower storage and operational costs.
- Faster processes: Cloud-based systems use workflow, decision rules, and automated calls to achieve greater lending efficiency. Automation reduces the amount of time your loan officers spend making each decision.
- Greater scalability: Cloud lending solutions scale to meet changing workloads. Cloud software updates automatically whenever an update or new feature is available, reducing maintenance overhead.
- A simplified user experience: A cloud LOS is configurable via menus, letting business users select options to make changes to the lending process and user interface. Unlike legacy LOS, there’s no need for extended programming to make modifications.
- Better security and backups: In the financial services industry, data security is essential. Cloud-based LOS systems hosted on AWS offer the latest in user authentication, encryption, backup, and failover technology to ensure LOS reliability and data durability.
The cloud is a very cost-effective option. Reallocating your IT budget to a cloud-based LOS will result in lower CapEx and OpEx.
Prioritize Detailed Data Analytics
Once you’ve implemented a cloud-based LOS, your next IT investment should be in data analytics. Cloud-based LOS acquire and generate volumes of loan data that provide valuable insight into risk and portfolio performance. In the past, loan officers relied on years of experience to assess risk. Some lenders may have been more formal in evaluating loan performance, downloading portfolio data from a warehouse and analyzing it in Excel.
With data analytics, there’s no reason for lenders to guess how credit policies are affecting portfolio performance. With an investment in data analytics, you can:
- Analyze loan data to determine how past credit policies are affecting specific segments of your portfolio;
- Modify credit policies to reduce risk or increase lending opportunities in response to market dynamics;
- Find patterns in the loan data that indicate likelihood of delinquencies and proactively offer options to avoid defaults; and
- Use predictive models to estimate future risk as you modify credit policies.
You’ll get the greatest value from data analytics that are natively integrated with a cloud-based LOS. Not all LOS systems offer integrated data analytics capabilities. Lenders making an investment in cloud should carefully consider the added benefit of including data analytics in their IT budget.
Invest in SaaS Lending Options
Cloud-based LOS solutions offer easy integration with a wide range of SaaS lending capabilities that enhance the system’s performance. SaaS improves lending efficiency through automated access to valuations, trended credit data, verifications, and fraud analytics. Lenders can choose the options that meet their specific needs, including repetitive, yet complex, time-consuming work such as:
- Determining if dealer collateral valuations are accurate or if there is “padding” in the loan application;
- Structuring loans based on recent credit payments that provide a far more detailed and accurate assessment of a borrower’s ability to pay;
- Automatically verifying an applicant’s income and/or employment before offering a deal to subprime lender; and
- Detecting potential identity theft—a sure indicator of loans likely to default.
You’ll get immediate value from SaaS lending capabilities when they are pre-integrated with cloud-based LOS solutions. There’s no need to spend time and budget on protracted custom integration.
How to Optimize Your Lending Solution IT Spending
Cloud-based lending solutions don’t have to break the bank. The key to making the most out of your IT budget is to focus on services that improve efficiency while reducing risk. Cloud-based LOS systems, data analytics, and SaaS lending options are smart investments.
It’s an exciting time to be a lender. Investing in the right technology now will help you stay competitive in the coming decades.
defi SOLUTIONS offers comprehensive lending solutions to banks, credit unions, and auto lenders. We provide cloud-based loan origination software, data analytics tools, and many other customized IT services to our customers. With our help, your IT budget will do more. If you’re ready to maximize your IT spending, start by contacting our team today or registering for a demo of defi LOS.
Get in touch with us today and get a demo!