loan servicing platform community banks


The defi Team Community Banking, defi INSIGHT, defi MANAGED SERVICING, Servicing Systems

community bank outsourcing loan servicing

Community banks excel at helping local families and businesses. They’re essential to the development of cities, towns, and neighborhoods. These community banks nurture financial growth in good times and stay the course during economic downturns. As part of the community, they understand local needs better than any big banking conglomerate. By focusing on core competencies, community banks can readily tailor their services to maintain a competitive advantage.

Today’s community banks are evaluating a spectrum of services they provide, often with the intention to enhance core services while outsourcing others, mostly back-office services. Personal, auto, and home loans are an important part of any community bank’s business. They must work closely with customers to structure loans that meet their needs. But once a loan has been funded, back-office tasks and the costs of servicing loans can detract from what community banks do best. Their primary focus involves working directly with customers to address their financial needs. Many community banks have voiced the need for greater efficiency in handling high-volume, repetitive loan servicing processes. There are three compelling reasons why community banks are outsourcing loan servicing.    

Three Reasons Why Community Banks Are Outsourcing Loan Servicing

Deciding to outsource loan servicing simplifies many aspects of a community bank’s lending activities. Consider the investments many community banks have already made or may be considering making to support loan servicing needs: 

  • Procurement and installation of IT infrastructure to support the service.
  • Hiring and training of loan servicing agents.
  • Implementing processes to accept payments via mail, email, and online/mobile applications.
  • Establishing expertise in the management of delinquencies and defaults, along with the recovery and remarketing of returned vehicles.

This takes a big commitment of capital, as well as additional and ongoing operational expenses. It requires infrastructure, staff, and experience, along with an integrated account servicing platform. An alternative approach to meeting these needs involves outsourcing loan servicing to a third-party provider. Outsourcing delivers services more efficiently and cost-effectively than can be done in-house. Here are three of the most compelling reasons for community bank outsourcing loan servicing. 

#1 High-Quality Loan Servicing At Lower Cost

Loan servicing requires infrastructure, such as office space, computers, software, networks, and telecommunications equipment. Each of these requires an upfront investment, ongoing maintenance, and costs more when upgrades are needed. To reduce IT infrastructure and support costs, many community banks have already moved to cloud-based software solutions that manage core processes like opening accounts and originating loans. 

For community banks, outsourcing loan servicing is a logical next step in reducing back-office processing costs. With the economies of scale resulting from focusing solely on loan servicing, outsourcing providers deliver these 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. All of these activities detract community banks from focusing on their 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 these staffing concerns. Regardless of loan volumes, an established loan servicing provider will have enough experienced staff available. This lets them easily scale up or down to meet a community lender’s loan servicing needs. 

#3 Enhance Loan Servicing Using the Latest Technology

Community banks are beginning to outsource loan servicing to companies with their own loan servicing systems. These lenders then benefit from the continual innovation and process improvement these third parties provide as their core function.

Technical innovations have dramatically impacted all areas of banking and lending. Loan servicing providers recognize the value of adopting new technologies, then integrating them into a lender’s 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 before they become a problem.

For most community banks, evaluating the latest innovations in banking technology and incorporating the most relevant capabilities into a loan servicing system is a daunting task. Outsourcing non-core functions to a loan servicing provider allows them to realize those benefits without spending time researching, procuring, integrating, and supporting software.

Focus On Your Core Competencies

Having experienced staff, the latest technology, the ability to easily handle changing loan volumes, monthly performance reports, cost savings, increased process efficiency, and improved customer satisfaction result when expectations for loan servicing are met or exceeded. The above reasons are just a few that make a compelling case for outsourcing loan servicing. They allow community banks to stay focused on their core competencies, which include understanding local financing needs, being on a first name basis with customers, and working face-to-face to offer personal, auto, or home loans that help local consumers achieve their financial goals.

Getting Started

defi SOLUTIONS offers solutions for a lender’s complete loan or lease lifecycle. Partnering with captives, banks, credit unions, and finance companies, defi’s market-leading solution helps lenders exceed borrower expectations. From digital engagement through the complete lending process, defi sets new standards for flexibility, configurability, and scalability in originations, servicing, and managed servicing. defi SOLUTIONS has the backing of Warburg Pincus, Bain Capital Ventures, and Fiserv. For more information on community bank outsourcing loan servicing and how defi can help, please visit

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