Why Lenders Need Digital Transformation For Financing Proposals

Lenders are facing more competition than ever. From e-commerce giants to rideshare apps and investment banks. Applying for a loan or other forms of credit is getting easier, which is why traditional and fintech lenders need to be ahead of the competition to retain market share.

By Gianluca Bisceglie, Visyond

Getting in on the consumer and business loans market are companies that don’t need to go through a digital transformation. Companies such as Amazon, Rakuten Ichica, PayPal, Alibaba and Grab, a ride-share service in South East Asia who recently acquired the Uber network in that region — were born in the digital era. Now you can access finance and credit from any of them.

Between e-commerce giants, fintech startups and digital challenger banks, consumers have more options than ever when they want a loan. New lenders offer products aligned around the needs of digital consumers, often providing lending decisions within minutes, not hours or days.

Ultimately, that is what lenders need to provide to remain competitive. To achieve that, lenders need to go through a digital transformation of back-office functions.

How to transform financing proposals?

As Jim Marous, Publisher of the Digital Banking Report said in an article, “To digitally deliver an exceptional customer experience, an organization must build from within, engaging all functional areas and stakeholders.” This means doing more than creating an app, which Marous compares to putting “lipstick on a legacy pig.”

He says this transformation needs to include “all back-office processes and data flows to make sure they are in alignment with what is required by the digital consumer.”

For lenders handling a large volume of financing proposals (products that are often more complex than simple small-scale consumer loans), this means reviewing the following areas before looking at the user experience of the lending process:

  • Data flow: Lenders need to absorb a lot of information to come to a decision. Unfortunately, if this isn’t collected and processed quickly, borrowers will go to those they know to have a fast process to get the finance they need.
  • Review your information sources: Application form, credit checks, internal risk analysis, external signal checks, and see what can be streamlined. Understand how to make efficiencies to bring systems together, or overhaul legacy systems, to provide a more efficient process for stakeholders, colleagues and customers. Where necessary, introduce machine learning and other new tools to speed this process up.
  • Dynamic risk analysis (underwriting criteria): One area that can cause bottlenecks is underwriting. Especially when each case is assessed on its own merit. Criteria and risk analysis can also change on a regular basis, depending on a wide variety of factors.

Not everything in this process can be automated. However, with new tools, such as Visyond, underwriting can become more efficient. Your underwriters can update risk factors in a spreadsheet that everyone can access (without worrying about breaking formulas or over-writing data), while audit trails and other controls keep the companies lending criteria safe.

Alerts. Fraud is on the increase. Customers need to know their data is safe, especially when it can be stolen and used to take out financial products.

Predictions. Anticipating customer needs is the most effective way to provide ongoing solutions that fit their goals and circumstances. Taking a proactive approach, using past financial behavior and current activities, puts you, as a lender, in a stronger position when a customer is ready to take another step in their life, such as upgrading a car, buying a house, or investing.

• And then the application process. With everything else in place, you need to ensure the application process is smooth and frictionless. A mobile-friendly application is an essential part of the modern lending landscape, even when you work with brokers and intermediaries. Help those that send customers to you make it easier for the end-user.

At every step of the way, put the customer and their needs first. Simplify and streamline former analogue processes. Implementing these changes incrementally will make it easier to make the transformation, and ultimately, improve the customer experience, providing these changes start in the back-office, with data flows and systems, not just looking at the apps used in lending applications.

Gianluca Bisceglie is the founder and CEO of Visyond, a cloud-based spreadsheet automation software that enables finance and business professionals to collaborate securely whilst building models, streamlining routine spreadsheet operations and performing analysis in a quick, and easy, intuitive and visual way.