With rising demand for fast and timely services on the customer side on one hand and stringent regulatory requirements from government bodies on the other hand, financial institutions (FIs) have to streamline their business processes to correspond with both of them.
By using advanced digital lending systems, alternative lenders and banks can kill two birds with one stone. FIs can significantly improve their loan origination and servicing process flow to enhance the overall customer journey. And due to leveraging automated loan origination and processing systems, lenders can stay compliant and up to date with all changes in the financial sphere regulations.
Let’s take a more detailed picture of how end-to-end automation of lending becomes possible with loan management software.
Table of Contents
What is automation software for the financial industry?
In recent years, the financial industry faced the necessity to have better operational efficiency and to enhance the overall customer journey. Alongside that, FIs had to comply with more and more stringent compliance and regulatory requirements.
These industry trends made banks and alternative lenders turn their faces towards digital transformation and automation. Adoption of advanced AI and ML powered automated lending software systems has become the top priority for FIs to sustain.
Automated lending platforms are not just for delivering faster processing speeds and reduction of human error occurrence probability. Automated financial systems provide overall digital reshaping of financial services, from enhanced accuracy of processing data to an increase of productivity.
Must-haves of an effective lending automation system
Lending is a complex phenomenon and comprises several steps. Each of the steps can and should be revised by FIs to ensure automation and, consequently, enhancement.
At ABLE Platform, we recommend that the following features should be embodied in an implemented automated credit software application.
Credit scoring and risk management backed by AI and ML
For precise and accurate credit decisioning and customer data analysis, smart and genuine tools are needed. Automated loan systems powered by Artificial Intelligence and Machine Learning ensure thorough and effective data collection and processing for pinpoint credit scoring and customer default risk mitigation.
User-friendly and intuitive interface
An automatic lending solution should provide users with a high level of intuitiveness and simplicity in operating. That is true both for customers and employees. Responsive and user-friendly interface can enhance customer experience while streamlining the process of lending.
Capability to easily adjust business logic
An automated loan software platform should have a simplified system of business logic adjustment. Due to that, employees can change and modify business processes with no or little IT team or vendor involvement.
Multilevel security system
As financial data is the target of cybercriminals, maintaining high security standards is one of the highest priorities for FIs. An automated loan processing system should ensure that all sensitive financial and personal data are safe both from external and internal threats.
Loan origination automation. Tasks in the crossfire
Loan origination process embraces the iterations between a loan application sent to a lender by a customer and the fund disbursement or the loan rejection. All the iterations are complicated and complex and require significant time and effort to handle. Big departments of loan officers had to manage that work manually in the past.
With the development of new intelligent technologies, manual handling of all the steps can and should be improved or even completely replaced by leveraging advanced loan origination software nowadays.
What areas of the loan origination process can be streamlined with an automated loan approval system?
Verification and management of bank accounts
When applying for a loan, customers should have a quick and easy opportunity to verify, add, and change the information about their bank account. Due to that, lenders can automate the collection and usage of bank statements of customers to ensure a more accurate and precise process of credit scoring.
Customizable loan application
The forms of loan application should be designed in an easily customizable way to be usable both by a borrower and a lender. Customers should have access to them through any device or a browser to apply for a loan without complications. The forms of loan application should be compiled to correspond to the specific lending product and comply with international and local laws and regulations.
Automated email communication
A loan officer should always have an opportunity to contact any client at any moment. Manual emailing in this case is too time-consuming. By using an automated tool for editing customizable templates for emailing, loan officers can send personalized emails to potential clients on certain triggers.
The processing of loan application
Though traditionally lenders used human beings in the process of loan approval, the automation of processing of loan application should prevail over human involvement. For that purpose, FIs should have advanced highly adjustable scorecards deployed in the automatic lending system. The scorecards should be based on an intuitive and easily customizable interface to help the lender’s employees to make precise loan decisioning on the basis of automatic evaluation of borrowers.
Automation of risk evaluation and underwriting
Risk assessment and underwriting are the most critical lending stages. To make the process free from human errors, the stage should be fulfilled by a digital assistant—automated loan platform. How do automated lending systems handle that work? Read on.
Automated loan decisioning
An advanced lending system can provide loan officers with insights and analytical data that are necessary for an accurate process of loan decision-making. But along with automated loan decisioning, the system should give a loan officer the opportunity of manual approval, rejection or sending a loan application back to a customer.
Loan underwriting
For thorough and accurate automation of underwriting procedures, FIs should use well-tailored models of credit scoring. They allow lenders to reduce credit risk and avoid loan portfolio deterioration. As each lender usually has its own unique criteria of scoring, they all should be built into the automatic lending system to make more accurate and effective automated loan decisioning.
Automation of the loan offer
Aside from automated loan approval, digital lending platforms can grant lenders the opportunity to make a personalized offer of several loan products according to the customer’s credit scoring and history.
Risk evaluation
Though risk assessment is a tricky area, advanced solutions for automation backed by AI, algorithms of Machine Learning, Big Data, or deep neural networks can help FIs make accurate decisions. And if coupled with traditional approaches, alternative ones based on leveraging the automated systems can minimize risks and make the process of risk evaluation efficient and errorless.
Automation of loan servicing tasks
In this section, we try to reveal how digital lending solutions go far beyond simple automation of loan approval, fund disbursement, and repayment monitoring. Go on reading to find the ways of loan servicing automation.
Tracking of customer interaction
All the data about interactions with customers is automatically collected, logged, and centrally stored. Due to that, information like history of payments or customer service queries is easily accessible for loan officers.
Digitalization of statements
Banking statements are perhaps the most complicated and expensive sphere of loan servicing for managing. By leveraging automated software systems, all paper documents are available online and digitized now. That significantly lightens the burden of paperwork for employees and makes documentation available for customers any time, anywhere.
Payments reminders and alerts
Due to automatic loan platform implementation, users can get scheduled automatic alerts that notify them about future or delayed payments. Alongside that, lenders get alerts and notifications about any probability of a loan default to react timely and accordingly.
Management of repayment schedule
With digital lending solutions on board, lenders can automate repayment schedule management. Automated systems suggest the way loan officers can change the schedule of payments, adjust rollover payments or fees to prevent bad debt occurrence and loan portfolio deterioration.
Automatic updates of data from credit bureaus
Digital lending solutions update customer data from credit bureaus on a regular basis. This allows lenders to have up-to-date information about customer financial health.
Benefits of systems for automation of lending
In sections above, we cleared out that all the stages of the process of lending can and must be automated to ensure customer satisfaction and streamline operations within FIs. But how do automated lending systems benefit lending organisations?
Decision-making process enhancement
AI-powered automated solutions significantly reduce probability of errors in loan decisioning due to the accuracy of customer data analysis.
Time & costs saving
Due to automation of repetitive and time-consuming processes, employees can shift their focus on more creative and productive tasks.
Data collection & processing acceleration
Technologies like Big Data, Machine Learning, and deep neural networks significantly improve and accelerate the collection and processing of data.
Client interaction improvement
The leveraging of digital platforms makes financial services available anytime and anywhere and help to create personalized offers to satisfy customer needs and establish customer loyalty.
Gaining access to new customer demographics
Due to the opportunity to provide financial services online, digital lending platforms create the opportunity to reach a new generation of customers who are familiar with digital technologies and reach the customers in areas with no physical offices or branches.
Risk mitigation
Automatic lending software systems backed by AI enhance the analysis of customer data. That helps lenders to minimize customer default probability and foresee the changes of a loan portfolio.
Are you ready to go digital?
Digitalization of finance and financial services has already become a new reality. Technologies like AI and ML are widely used to improve various spheres of everyday life. Automation of financial services is yet another step of lenders towards their customers.
Automatic lending platforms are customer-centric. The new-gens are more familiar with digital interfaces than with papers and brick-and-mortar branches. To successfully approach the next generation of clients, financial institutions should go digital right now.
