Digitization has altered the landscape in business lending and created competitive pressure that will continue to push solutions modernization—and consumers and businesses are ready. Digital efficiency is key and underpins lending success in a digital-first era. Most importantly, it improves consumer retention, upsell, and cross-sell opportunities for lenders.
As the future of business lending skews toward millennials and Gen Z, financial institutions will need solutions that offer seamless experiences. This means providing a fully contactless digital lending process—from seamless digital applications to fast, automated loan decisions. Financial institutions can jumpstart (and grow) digital business lending by implementing advanced technology solutions to digitally engage borrowers and optimize business lending processes.
Digital-First Mindset Driving Financial Institution Growth
Millennials are the largest drivers of new loans. This makes sense considering there are more than 166 million individuals under the age of 40 in the U.S. as of 2020—a number that represents more than half of the U.S. population.
Financial institutions are feeling the pressure all around. Digital banking reigns supreme as four in five consumers prefer managing finances digitally. On top of the pressure to digitize, customer loyalty is waning, with 27% of accountholders considering leaving their financial institution. With more than a quarter of their business at risk, institutions need to innovate how they engage consumers.
Digital-savvy financial institutions are scooping up this business. According to the Bain Retail Banking NPS ® Survey, 54% of loans and 50% of credit cards are opened with providers that consumers do not consider their primary financial institution in the U.S. And more than three quarters (78%) of those surveyed who received a direct offer from a competitive institution said they would have purchased from their primary institution had they received a similar offer.
As more and more lenders provide digital-first experiences, consumer expectations have evolved. Processes that used to take days can now happen in minutes. And what 's good for the goose is good for the gander: In addition to creating faster, better consumer experiences, technology has decreased the operational effort required of financial institutions. Technology also enables demand creation so institutions can reach new consumers and foster deeper relationships with existing ones.
Financial Institutions Face Pressure To Modernize
Institutions that have not modernized business lending processes are feeling the pressure. Those that still rely on manual and paper-based loan approval procedures find they are out of step with a digitized world, affected by:
- Slower decision times
- Burdensome data management
- Time-intensive manual processes that span disparate systems
- Inefficient application processes and communications with the borrower
- Expensive wet signatures
- Difficult document collection, management, and storage
The cumulative effects of these inefficiencies are compounded by the evolving landscape in lending. Nearly nine in 10 (88%) financial institutions believe they will lose some business to standalone fintech companies over the next five years. With the number of fintech unicorns quadrupling in just 18 months, that fear is not unfounded.
Managing Credit Risk in a New Era
The business credit framework has not changed. Lenders still consider credit profile and history, firmographics, and cash flow analytics when evaluating debt capacity. This requires the ability to collect and analyze data like macroeconomic factors, industry trends, digital presence, credit performance, financials, bank accounts, POS transactions, and business credit reports.
Solutions to manage risk, however, have modernized. Advancements in machine learning techniques have transformed risk analysis to consume thousands of data points and leverage insight and learning from decades of loan performance data . For business lenders, this means better, faster, more accurate, and consistent decisions in compliance with the set credit policy. Digital-first lenders can:
- Use superior workflow tools to aid in better decision-making and operational resiliency
- Leverage risk assessment techniques that cannot possibly be performed by humans
- Improve accuracy and consistency of credit decisions
- Specialize and customize by industry based on business goals
- Leverage new data sources and decades of credit performance data
- Process large volumes of data in seconds alongside the ability to identify and focus on what matters most
Jumpstart Digital Lending With MeridianLink Business
Financial institutions that have transitioned to digital channels are enjoying more opportunities to better serve consumers, expand market share, and drive more revenue. Using MeridianLink ® Business means harnessing innovations in analytics and data-driven decision-making that not only provide a decisive competitive advantage but also optimize processes at a lower cost.
MeridianLink Business delivers powerful business lending solutions for banks and credit unions so they can optimize processes, digitally engage borrowers, and leverage advanced technology for smart decisioning:
- Fully Digital: Everything is digitally customized , from the initial interaction with small business consumers to closing.
- Smart Decisioning: We have solid experience underwriting hundreds of data points on small business borrowers .
- Rapidly Enabled: Banks can be up and running in 90 days or less with this cloud-based solution.
- Sales & Marketing Engine: Build data-enriched relationship management, marketing, and sales campaigns to focus efforts on the best opportunities.
- Business Owner Hub: Borrowers access the hub to apply for financial products, check the status of applications, and communicate with staff from any digital device.
- Decisioning, Boarding, & Analytics: Benefit from one integrated system with digital tools for application decisioning through boarding.
MeridianLink®'s proprietary algorithms assist with guarantor and business risk analysis for quick decisions with flexible loan closing options and processes for boarding . The intuitive, logical flow streamlines the experience on both sides of lending. Learn more about MeridianLink Business.