5 Trends Reshaping the Lending Industry

Kris Frantzen
Kris Frantzen – Senior Product Manager – North America

It’s no secret that personal loans are growing in popularity, in fact, 22.5 million consumers have at least one unsecured personal loan—a 12.9% increase from the previous year. We can only assume this number will continue to rise as the Gen Z population is coming of age and looking for solutions and guidance to improve their financial wellbeing. Gen Z, Millennials, along with traditional bankers are seeking lending options that are most convenient, which often means digital, flexible, and seamless. And with so many loan options available, it’s important that banks and credit unions keep their eye on the latest trends, so they can optimize their lending process and close the customer first.

Let’s take a look at 5 lending trends to keep in mind as you consider how to optimize your loan origination process.

End-to-end automation

When shopping for a loan, one thing that is on the top of every applicant’s mind is the amount of time it will take to complete an application as well as how long it will take to receive a decision. The applicant is focused on the need for the funds and is a Google search away from finding numerous other financial institutions with which to apply. Consumers, especially those of the tech-savvy generations, are certainly not interested in driving up to their local branch (assuming there even is one) to fill out paperwork and find documents, or to wait for days for an approval.

Automating the entire loan lifecycle will not only decrease the manual labor for the lender but improve the lending experience for the borrower. Something as simple as using a CRM or system of record to prefill known data or enabling social media shortcuts such as entering LinkedIn credentials to prefill an applicant’s work history can be a huge value add.

Lending on the cloud

Transitioning to the cloud is gaining momentum in the banking industry, but it is still in the early stages. A recent McKinsey survey showed only 13 percent had half or more of their IT footprint in the cloud. The initial motivation to migrate to the cloud was to reduce IT costs, while that is still a valuable benefit, it’s now seen as a way to compete with digital-first competitors and generate revenue. A cloud lending system provides a scalable, flexible, and secure infrastructure that enables you to deliver new services and products to the market quicker while giving you more freedom to innovate and experiment. Cloud lending tools can be used to automate the loan origination process, safely manage documents, and minimize the risk fraud and theft.

Hyper-personalized experiences

In this digital-first era, basic personalization will no longer suffice in financial institutions efforts to attract and retain customers. Consumers expect their FI to deliver tailored offers and personalized experiences. Irrelevant offers coupled with impersonal communication will only lead to low conversion rates and unimpressed customers.

Even if an applicant doesn’t complete their application, FI’s have access to valuable data that they can take advantage of to successfully offer the right product at the right time. Using this data as context to provide hyper-personalized offers will lead to ongoing customer wallet-share and loyalty and increased revenue.

ESG lending

A growing concern for the environment and other ethical issues is becoming a deciding factor for many consumers when choosing their FI. They are ready to reward or penalize organizations based on their efforts or lack thereof to help make the world more sustainable. What began as a concern typically for larger corporations, is now at the forefront of conversations between a bank and potential customer. More than 75% of consumers stated they are willing to purchase from a company that stands up for environmental and social issues.

In the realm of lending, offering sustainability-linked loans, investing in ESG friendly tech, and being transparent about your organization’s efforts towards issues like carbon emission or gender wage gaps can help you gain a competitive advantage.

AI powered lending:

Artificial Intelligence is revolutionizing the loan approval process as algorithms and machine learning help FIs look beyond traditional pass and fail guidelines. By leveraging AI-powered lending solutions lenders can target the right customers, provide holistic lending decisions quicker, and improve the customer experience. Artificial intelligence provides countless opportunities for improving customer acquisition and revenue gains.

How Temenos Can Help

Temenos next-generation loan origination system is an innovative application for both direct and indirect lending that has raised the bar in automated solutions. With its powerful decisioning, highly configurable applications, and extensive third-party integrations, Temenos Infinity Loan Origination will truly take lending to the next level.

Kris Frantzen
Kris Frantzen – Senior Product Manager – North America