As a community bank, you excel in helping local families and businesses. You’re essential to the development of your cities, towns, and neighborhoods. You nurture financial growth in good times and stay the course in downturns. You understand local needs better than any nationwide banking corporation. By focusing on your core competencies you can readily tailor services to maintain your competitive advantage.
Like many other community banks, you might be evaluating the spectrum of services you provide with an intent to enhance core services and outsource back-office services. Personal, auto, and home loans are an important part of your business. You work closely with customers to structure loans to match their needs. But once a loan has been funded, back-office tasks and costs of loan servicing can detract from your primary focus—working directly with customers to address their financial needs. In our work with community banks, many have voiced the need for greater efficiency in handling high-volume, repetitive loan servicing processes. We’ve identified three compelling reasons why community banks are outsourcing loan servicing.
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Three Reasons Why Community Banks Are Outsourcing Loan Servicing
The decision to outsource loan servicing simplifies many aspects of your lending activities. Consider the investments you may have already made or may be considering to make to support loan servicing needs:
- Procure and install IT infrastructure to support the service;
- Hire and train loan servicing agents;
- Implement processes to accept payments via mail, email, and mobile/online; and
- Establish expertise in the areas of delinquency and default management, and recovery and remarketing of returned vehicles.
That’s a big commitment of capital and ongoing operations expense. An alternative approach to meeting these needs is outsourcing to a loan service provider. With all of the required infrastructure, staff, and experience, and an integrated account servicing platform, outsourcing can deliver services more efficiently and cost-effectively.
Here are three of the most compelling reasons for community bank outsourcing of loan servicing.
Want to learn more about the advantages of outsourced loan servicing? Contact our team today.
#1 High-Quality Loan Servicing At Lower Cost
Loan servicing requires infrastructure: Office space, computers, software, networking, and telecommunications. Each requires an upfront investment, ongoing maintenance, and upgrade costs. To reduce IT infrastructure and support costs, many community banks have already made the move to cloud-based software solutions to manage core processes such as account opening and loan origination.
Outsourcing loan servicing is a logical next step in reducing back-office processing costs. With the economies of scale that outsourcing providers enjoy as a result of their sole focus on loan servicing, they can provide the services far more cost-effectively than a community bank.
#2 Never Worry About Staffing For Loan Servicing
Throughout the course of an economic cycle, the volume of outstanding loans varies. Meeting a growing demand involves hiring, training, and potentially acquiring additional office space—activities that detract from focusing on your core work. Similarly, with declining loan volumes, dismissing or redeploying experienced staff, as well as relinquishing office space, adds to administrative overhead.
Community banks that outsource loan servicing no longer have those staffing concerns. Regardless of loan volumes, an established loan servicing provider has the experienced staff needed. That lets them easily scale up or down to meet your loan servicing needs.
#3 Enhance Loan Servicing Using the Latest Technology
When you outsource loan servicing to a company that also develops its own loan servicing system, you benefit from continual innovation and process improvement.
Technical innovations have had a dramatic impact on all areas of banking and lending. Loan servicing providers recognize the value of adopting technologies and integrating them into the platform. This lets them continually improve process efficiency and service quality while lowering overall costs.
Multichannel online and mobile technologies facilitate payments, account management, and customer inquiries. Automated services optimize the processing of inbound paper transactions and communications. Artificial intelligence and predictive analytics provide detailed insight into loan payment trends, helping to proactively identify potential defaults and initiate appropriate mitigation strategies.
Evaluating the latest innovations in banking technology and incorporating the relevant capabilities into your loan servicing system can be a daunting task for most community banks. Outsourcing with a loan servicing provider allows you to realize those benefits without expending time to research, procure, integrate, and support software.
Focus On Your Core Competencies
Experienced staff, the latest technology, the ability to easily handle changing loan volume, monthly performance reports,cost savings, process efficiency, and customer satisfaction that ensures the quality of loan servicing meets or exceeds your expectations.
Any of the above reasons alone make a compelling case for community banking outsourcing loan servicing. Together, they provide the most compelling reason—allowing you to stay focused on your core competencies, applying a unique understanding of local financing needs, knowing customers by name, and working face-to-face to offer personal, auto, or home loans to help them achieve their financial goals.
defi SOLUTIONS provides software solutions and services across all points of the lending life cycle, from origination to servicing, and a full range of business process outsourcing services for community banks. If you’re looking for more efficient ways to manage loan servicing, take the first step and contact our team today. We welcome the opportunity to discuss your requirements.
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