New waves of tech evolution are creating a transformation in lending & credit. More intelligent, relevant hybrid services are arriving – and solving problems in a way that static legacy products haven’t in the past. New digital channels, innovative risk models, and the ability to modernize legacy systems are all helping lenders create value for customers.
Through conversations and successful engagements with clients in the banking & lending space, trends and technologies are emerging that will separate the top performers from the rest. Leveraging these capabilities can lead to a competitive advantage to help you get ahead this year.
Customers today are increasingly conditioned towards the digital delivery of tech firms (Amazon, Google, Facebook) and digital-first financial challengers. Both individual and business borrowers are being presented with quick and paperless application experiences. This is an invaluable advantage, as compared to the drawn-out processes of the past. Borrowers want to apply for and receive quick decisioning and loan fulfillment when, where and how they want it. Lenders would be wise to realize that convenience is the ultimate differentiating feature.
Digital lenders are now incorporating advanced Know Your Customer (KYC) and multifactor authentication approaches to their digital apps. Incorporating enabling technologies like digital identity and biometric scanning make it possible to ensure adherence to security and data protection regulations and best practices while keeping the client experience frictionless. Customers can apply for lending products within 60 seconds on a smartphone while remaining fully protected.
With remote and real-time being the order of the day, how should lenders approach creating a seamless digital onboarding process? The key will be to put the customer at the centre of its development and to harness the right technologies to support it.
A lack of data is never the issue; the issues lie in either accessing or applying deeper modelling of the data to provide valuable insight. We have noticed two trends both in Canada and abroad, where lenders are using their abundance of data to learn more while accelerating the loan approval process.
The first trend is that of leveraging data to track deals won and lost/turned away. Information is typically sitting in disparate locations such as desktops, data warehouses or written on paper. Through the example of a Commercial Credit application there is equal value in the data of both funded and unfunded deals. Even if the deal was not funded or financed, the work that went into the structure and data capture can provide valuable insights that can be mined and modelled to support future decisioning. Cap rates, rent rolls, and appraisals are all examples of valuable data that can be leveraged to move a step quicker than the competition.
The second trend having an impact on the customer is the use of data during the pre-approval process. Lenders are increasingly leveraging all the data presented by a first-time borrower to approve larger overall loan capacity. Lenders are running risk assessments against not only the borrower’s request but their total borrowing capacity. In doing so, when the borrower comes back requesting an increase in a line or to borrow additional funds, if the amount is within the pre-approved limit, the decision is made instantaneously. From a customer’s perspective, the lender has wowed them with turnaround time. This nimble approach addresses customer needs at a competitive pace and creates loyalty.
Overall, lenders shouldn’t overlook their data and should ask themselves how they can leverage what they already have with new innovative toolkits.
Accenture defines microservices as “an approach to technical architecture. As opposed to a monolithic design, where applications are built with a single codebase, the microservices approach breaks down applications into simple components that perform recognized business functions.”
Today lenders are constrained in quickly offering new digital capabilities or product offerings to their customers because their IT systems are ‘locked down’. It can take months and years for seemingly simple requests. Through microservices, IT departments are better able to support the Business Lending group through agile exposure of niche capabilities.
In the context of loan origination, for example, a document capture service, a credit check service, or a digital signature service, can be exposed for use in building a decisioning process.
Microservices provide far more agility and flexibility in the long term than traditional applications. With discreet services, business teams can start to self-serve data and explore next-gen digital services. This trend towards a flexible, responsive approach to building applications is necessary for the rapidly transforming lending space, where user demands and technological capabilities keep evolving and growing.
Tomorrow’s lending & credit marketplace will be even more dynamic thanks to the innovations we’re seeing in financial technology. We hope that you can leverage these trends to get ahead this year.