Lending Automation – Industry Fad or Here To Stay?
In the list of buzzwords for financial institutions, one of the biggest over the past year has been "automation." This has been touted as the new ‘cure-all’ for banks and credit unions. Have lagging loan volumes? Get yourself some automation. Want to save money? Find that automation to save on those fixed costs.
But, at the end of the day, is automation the new panacea or just snake oil drummed up by folks wanting to make a quick buck?
Well, the answer is both.
Benefits of Automation
Being able to define your business processes and really lay out how a loan gets from point A to point B in your institution can show significant improvements that automation can bring. Embracing the use of automated credit decisioning can help put you top of your borrower’s mind. Imagine a more common scenario where a couple is sitting at the kitchen table after work talking about finances. They need a loan for a new car, and Google rates and loans in their area. Results for local institution appear, but they are directed to apply online and wait until an underwriter is back at his desk in the morning to decide on their loan. Or, they find a loan from an online marketplace that not only decisions the loan in less than 24 hours, but the loan can be funded in nearly the same time, too.
Streamlining the application process provides a huge impact for the institution but also for the borrower. Meeting those borrower expectations, and enabling them to bank when it’s convenient and not just during standard banker’s hours, is key.
Pitfalls to Watch Out For
Automation can be a great tool but it can also be a hinderance. Setting-up a system and pulling the old “set it and forget it” mentality can cause a lot of harm. Automation still needs a hand to help guide it, as well as to adjust it to market needs.
We saw during the 2008 recession the ‘pull back’ in lending meant a lot of overhead because the rubber stamp of approval needed to be reigned in. Having a system in place that grows with your institution is vital, but not at the cost of automating away what makes your market unique.
We often see platforms that can offer quick decisions or workflows that get a borrower from point A to point B in record time – however, these are processes designed by someone else and don’t often allow for the customization that your lenders need. What’s the benefit to automating someone else’s process? How does this help you in your market?
Growth and Customization
Having an automated system in place is great to help create a lean machine, but 100% of the process can’t be fully automated. If someone tries to sell you on completely automating your process - run away fast. However, finding the right mix of automation - balancing the “no-brainers” with the loans that need a little more help to complete, can pay massive dividends. This level of automation also needs to consider the nuances that your market requires. The customization of business rules and workflows can be just as powerful as automating those processes.
At Alogent, we believe in developing innovative tools that enhance efficiency through that ‘perfect’ blend – for customers, members and FI employees. For us this means automation that enables you to fund loans faster. FinanceGenius, our cloud-based and mobile-ready loan origination solution (LOS), is scalable and quick-to-market, with built-in intelligence and the ability to apply rules specific to your institution. Learn more at alogent.com/lending.