The digital revolution that is taking place in the finance sector has undoubtedly transformed banking and lending. It wasn’t long ago, when getting a loan consisted of going down to your local bank or credit union to learn about your options, filling out a stack of paperwork, faxing over your passport, and patiently waiting to learn whether you’ve been approved. Financial institutions didn’t have to worry much about the competition because the process was so time consuming that the likelihood that their customer would do this with three or four banks was minimal.
However, digital modernization has completely changed this process, and FIs must transform their lending process if they want to close the customer first. The ability to leverage data is key to reshaping and optimizing your current lending process to improve customer acquisition and loyalty.
There are 3 ways you can use data to transform your lending:
Make accurate, real-time decisions
Real-time lending leverages intelligent automation and data to modernize the traditional loan process. Rather than spending manual time and labor to review paper applications and faxed documents, automated loan origination tools can collect the data provided by the applicant, evaluate if it meets the rules set by the FI, and decide almost instantaneously. Because so many digital-first banks and alternative lending solutions are emerging, the ability to make quick decisions is necessary to compete in the lending sector. It’s also a competitive advantage if your LOS can look beyond a credit score. While income and credit scores will always play a role in loan approval, the ability to set parameters to look at other factors like social media, education levels, work history, and potential future earnings can prevent you from turning away potential borrowers.
Improve customer targeting
One of the most valuable things you can do is use your data to get a better understanding of your customers outside of the information they’ve provided on an application. With a data-driven approach, lenders can get a holistic view of their customers and provide the right products and offers at just the right time. By using data sourced from third parties such as a borrower’s web searches, social media, or shopping activities, FIs can decide how to support their customer best financially. For example, if you know that your customer has been searching for solutions to fix a broken transmission and visited several car dealership websites – an offer for low interest rate car loans would be more effective than an irrelevant offer for home loans. Being able to get in front of the right customer at just the right time is a necessity in your cross-selling efforts.
Optimize Your Lending Process
Just because your lending process is running doesn’t mean that it cannot be improved. One mistake we often see FIs make after modernizing their lending tech is “setting and forgetting it.” They feel that because they implemented a new system or executed an improved workflow there is no more work to be done and they can focus their efforts on other things. However, just because it is good does not mean it is at its best. You should always assume there’s something you can improve; especially as trends continue to disrupt the market. Using data to analyze and evaluate your current process will provide valuable insight you can use to optimize your LOS.
For example, if you notice customers aren’t completing forms or don’t make it pass a certain point in your applications you can A/B test small tweaks and new features and the impact it has on your concerns. We recently worked with a FI that continually tested minor changes like where the “apply now” button was placed, the color and font of text that was used, and that data improved their application abandonment rate tremendously.
Adopting a data-driven approach will help you move beyond legacy lending traditions and enhance the lending experience for both you and your customers.
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 decision-making, highly configurable applications, and extensive third-party integrations, Temenos Infinity Loan Origination will truly take lending to the next level.