How COVID-19 Revealed the Flaws of Many Lenders

Posted by Al Sefati

The materials available in this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your own advisors with questions regarding the content herein. The opinions expressed in this article are the opinions of the individual author and may not reflect the opinions of MeridianLink, Inc.

The COVID-19 pandemic has shined a light on many flaws within all aspects of lending. The flaws vary from the type of technology, like loan origination systems and account opening systems. They also highlighted inefficiencies within digital lending and digital banking. This blog will examine the following 3 flaws that were evident throughout banks and credit unions due to the pandemic:

  1. Outdated technology
  2. Inefficiencies within digital lending and digital banking
  3. SBA PPP digital lending

To learn more about the specific inefficiencies that we revealed and what are possible solutions, please read the entire blog post below.

Digital Lending is No Longer Optional in a Post Covid-19 World

COVID-19 has changed a lot within standard business practices and it’s also revealed the flaws of many organizations. Specifically those of the financial industry. It has revealed flaws within technology like loan origination systems and account origination systems. Additionally, it has revealed holes within digital lending, digital banking, and SBA PPP digital lending.


The last few months have catapulted the world further into the digital age. According to an article written by McKinsey, “we have covered a ‘decade in days’ when it comes to digital”. For example, within 15-days the use of telemedicine has increased 10 times, within 3-months the amount of video conferencing increased by 20 times, and the streaming service DisneyPlus has achieved in 2-months what it took Netflix 7-years.


Organizations that had already set up a digital aspect for their business had fared significantly better than those who did not have a remote or digital process set in place. For example, the luxury department store Nordstrom unveiled their curbside pick-up service in 2015. When the pandemic hit, Nordstrom already had a very convenient and safe way for their customers to shop. Additionally, their staff fully understood the process and so did their customers. This is also the case for many workforces who had a large number of employees working remotely.


Just like the pandemic highlighted those who excel in the digital space, it also brought to light the flaws in those who did not invest in digital. This is particularly evident within essential services like the financial industry. Banks, credit unions, and independent mortgage lenders who took steps to invest into their digital lending and digital banking, fared better during the pandemic. Lenders without the proper loan origination system or account opening system were left vulnerable to losing members and customers due to a lack of digital lending and online banking options.


In this blog, we will discuss what specific flaws were uncovered within the lending process and what can be done to improve those inefficiencies.


Outdated Technology

The implementation of CDC guidelines for social distancing and indoor capacities shined a giant light on the cumbersome and manual processes imposed by outdated technology. You don’t realize how many times you have to go over to someone’s desk, call a manager, or ask a college for help until you have to intentionally keep a distance from your colleges. Outdated loan and account origination systems have shown themselves an even bigger issue and frustration for staff, due to awkward processes.


So what’s the solution, if the technology is to blame what can be done? This situation may encourage financial institutions that it’s time to change their outdated loan origination system or account opening system (or both). A modern loan origination system will include automated tasks lists ensuring that staff is prompted by the system for every step of the lending process, reducing the need for face-to-face interaction, and complicated processes. A modern account opening system will allow for better integration with the loan origination system, as well as automated tasks resulting in significant process improvement, and an improved consumer experience.



Inefficiencies Within Digital Lending & Digital Banking

COVID-19 has opened the eyes of many lenders to the value and urgency of digital lending capabilities. There were two specific areas of digital lending and digital banking that were exposed to be flawed. The first was those financial institutions who were hesitant or did not see the importance of digital lending and digital banking. Their members and customers were left at a significant disadvantage. Many union construction workers (who are considered essential) receive physical checks and due to union regulations do not have direct deposit options. The proper digital banking tools can help significantly reduce foot traffic and create a better experience for the consumer.


The second flaw that was uncovered was those lenders who had partial online loan applications on their website. Many lenders who did not want to make an investment in digital lending, took the lazy way out and put a form on their website. This form would simply thank the consumer for their interest, ask them to call, or find a local branch. This is an unacceptable online lending experience and is not considered digital lending.


So what is the next step for these financial institutions? For those institutions that want to grow and expand their organization, an investment in true digital lending technology must be made. This technology should seamlessly integrate with the loan origination system and the account origination system. The technology should allow for a consumer to apply for a loan online, receive an acceptance or be declined, and fund the loan without any human intervention. This is a true digital lending experience and one that every financial institution should provide to their members and customers.


SBA PPP Digital Lending

In early July the government enacted the Paycheck Protection Program (PPP) and was offering small businesses loans in order to keep their workforce employed. To help business owners apply for this loan, the government worked with banks and credit unions nationwide for the application and distribution process.


Like mentioned above, due to safety regulations a mass spike for digital lending appeared. Those SBA-PPP-Software-MeridianLinklenders who were not prepared put their members and customers at a disadvantage when it came applying for the SBA loan. Those without SBA PPP digital lending capabilities potentially lost members and customers who went to a more modern lender or simply frustrated them by providing a long wait time in order to apply.


What can be done? Well, this is where MeridianLink comes in. In order to help banks and credit unions that have insufficient digital lending capabilities, we created a SaaS-based Fast Track software for SBA PPP digital lending that can be deployed within 48 hours. This tool enables banks, credit unions, and lending institutions to accept SBA PPP loan applications online using 3 simple steps. This technology enables financial institutions to accept digital loan applications from small businesses seeking SBA PPP relief. 


MeridianLink Digital Lending and Account Origination Technology 


MeridianLink creates modern digital lending and account opening technology that meets the needsof today's bank and credit union consumers. Our products are designed to help streamline the work in-branch and ensure that consumers have the best experience no matter where they apply for a loan or deposit account. Is your financial institution ready to modernize your technology? Take our Digital Journey Assessment for account and lending originations to see if you are digitally ready for today's digital world. 

Topics: digital lending, SBA PPP

Written by Al Sefati

Digital Marketing Manager, MeridianLink


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