Salesforce has developed a lending solution built on its customer relationship management (CRM) platform. However, lenders who’ve invested in Salesforce may want to kick the tires before they sign on. So let’s do just that. If you are considering building a loan origination system using Salesforce, we will take a look at the platform’s pros and cons while comparing it to other solutions to improve a lender’s business.
Loan Origination System: The Salesforce Approach
For those lenders invested in Salesforce, this tightly integrated lending software within Salesforce’s CRM platform lets them:
- Apply marketing, lead generation, and pipeline development tools to build demand.
- Analyze data to discover potential lending prospects among current customers.
- Nurture any leads so that they progress to become customers.
- Monitor referrals to capitalize on the most productive sources.
- Track and prioritize pipeline interactions until the deal is done.
This may sound attractive for companies with many years invested in Salesforce’s CRM platform. However, lenders also shouldn’t buy more software than they need.
What Does It Take to Build a Loan Origination System?
For those not already invested in Salesforce or who want to make their loan origination system (LOS) more efficient, it may be advantageous to consider other options. Some Salesforce-specific features won’t be used, though lenders will still pay for them.
Like many software platforms developed to aid the lending industry, Salesforce’s software excels in certain areas and falls short in others. For lenders solely focused on building or improving their loan origination system, Salesforce may not necessarily be the best choice.
Lenders that want a dedicated LOS should also look at cloud-based vendors. Using pre-integrated cloud-based lending services, machine learning, and auto-structuring, they can focus on increasing loan origination efficiency and reducing lending risk.
Powerful Pre-Integrated Lending Services
There are already many vendors that offer specialized, cloud-based lending services that increase process efficiency and improve decision quality. Loan origination solutions that pre-integrate these specialized lending services make it easy for lenders to select and configure a system that will meet their customers’ unique lending needs.
Non-Traditional Information Resources Reveal Financial Strength
Non-traditional information resources give lenders a more detailed and accurate picture of an applicant’s financial viability. Credit scores from the big three bureaus are staples for the industry, but they don’t always tell the whole story. Alternative credit data is an aggregation of payment information that looks at how applicants pay for utilities, mobile phone contracts, cable, rent, and other monthly payments, along with changes to address, real estate purchases, or bankruptcies. These give lenders a better understanding of an applicant’s ability to pay. Trended credit data provides up to 30 months of tradeline data to reveal improving, declining, or stable credit habits that give a lender a clearer picture of an applicant’s current financial standing.
Automated Verifications and Valuations
Automated verification and valuation services allow lenders to determine the accuracy of application data instantly. In seconds, the applicant’s employment and income can be confirmed or refuted. In addition, used vehicle valuations can be verified using analytic models based on vehicle inspection and sales data from major auctions, as well as historical and residual vehicle values.
Machine Learning Detects Fraud and Increases Approval Rates
Many cloud-based software platforms utilize advanced machine learning techniques to analyze loan applications to detect fake identities, inflated collateral valuations, and other subtle or blatant informational misrepresentations that strongly correlate with higher default rates.
Machine learning analyzes thousands of variables based on data obtained from credit bureaus, customers themselves, and lending products that help predict applicant creditworthiness. This technology allows hundreds of credit and risk models to be replaced by a single credit module that increases approval rates and keeps lenders’ practices compliant.
Auto Structuring for Automated Decisioning
In a digital lending environment, an ever-increasing number of underwriting decisions are becoming automated. With sophisticated software that helps apply decision rules, lenders can completely automate the loan approval process. It allows lenders to structure alternative deals automatically for applicants who initially fail credit policies while still protecting themselves from risk and maintaining regulatory compliance. This sort of automated loan structuring allows lenders to modify loan terms like down payments, interest rates, or loan terms. The software will automatically seek to match credit policies with customer-specific data, responding with approved or conditionally-approved loan offers in seconds.
Loan Origination System: Salesforce vs LOS Specialists
The best platforms for loan origination are designed to provide more flexibility, allowing lenders to customize their processes to match their customers’ unique needs. While Salesforce-based solutions cover the entire lending cycle, the loan origination portion of the process isn’t as efficient as other solutions designed specifically for lenders, and this lack of efficiency negatively affects profitability. Specialized LOS software gives lenders an edge when responding to some loan applications.
In a competitive lending environment, response speed matters. The time it takes for an approval to be issued for a loan application strongly correlates with captured deals. Loan decisions supported by non-traditional information sources, instant verifications, and machine learning allow lenders to avoid risk, make better decisions faster, and approve more profitable loans. Lenders who are serious about improving the efficiency of their lending process and improving the quality of lending decisions will want to work with software vendors whose sole focus is optimizing the loan origination process.
Getting Started
defi SOLUTIONS offers a total solution 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. If you would like to know more about the alternative to building a loan origination system using Salesforce, please visit www.defisolutions.com.
