In our previous blog on how banking has been disrupted, we covered how digital lending encompasses more than just having a web or mobile presence. Technology continues to evolve at lightning-fast speeds, leading to more sophisticated customer expectations — and financial institutions that embrace digital account opening and loan origination systems are better positioned to provide the best online application experience possible and win more customers.
In this blog, our journey with “Diane” continues as she looks to consolidate her debt and purchase her first home. For her lender, Big Little Bank, both loans will require reliable loan origination systems with workflow automation to maximize efficiency and streamline the process. Let’s see whether Big Little Bank rises to the challenge.
The Value of Time in Digital Loan Origination
After her initial experience trying to open a savings account with Big Little Bank, Diane knows better than to attempt anything from her mobile phone. Instead, she has parked herself in front of her laptop to apply for a mortgage. Her sister explained to her that she should set aside around 20-30 minutes to fill things out online, though her sister also said she was pleasantly surprised at how streamlined her application process was with her bank.
“It took me just under fifteen minutes. I guess they prepopulated a lot of the information because I already have an account with them. I hate typing, so that was a relief,” her sister had said.
Once she arrived at the personal loan application (a process that required her to navigate a winding road of clicks), she began filling out her personal information.
Geesh, this would be a lot simpler if I could just upload a scanned copy of my ID so that it could prepopulate some of the basic info.
At the 30-minute mark, Diane was a little disheartened that she wasn’t yet finished with the application process. Worse yet, she had no idea how much of the application she still had left to complete because there was no progress bar nor a list of items needed for completion. With no clear explanation, she kept having to hunt down items as they appeared within the application as “required.”
After 45 minutes, Diane clicked “submit” hoping to receive a fast response. Instead, she was redirected to a standard “thank you” page and there was no information about the next steps.
Frustrated, she called her banking representative. He said he couldn’t help and transferring her to someone else in the personal loan department. Another man answered, saying that he needed a few minutes to get organized. Diane waited, growing impatient.
After he finally tracked down her application, he let her know that she’d have to sign it by either printing and faxing the signed copy over or by coming into the branch and completing the application in person. Diane was flummoxed.
“Yeah, unfortunately, our systems don’t allow in-application document signing, so I apologize for the inconvenience,” he said.
Diane wondered if she should have just switched over to her sister’s bank after her initial poor experience trying to open a savings account. How much time and trouble could she have saved by now?
Streamlined Loan Applications = Happy Customers
If you’re wondering which inconvenience is going to be one too many for your customers, please take note: it’s the simple things that can make or break a customer experience, and in this digital era, those simple things are tied to automation – or lack thereof.
People have become accustomed to seamless digital experiences and instant gratification. If your loan application process goes against that grain, you’re losing customers and prospects.
Automation is a critical component of modern loan origination and account opening systems. You should aim to reduce the quantity of information that a consumer needs to manually type in and eliminate any duplicate processes from the experience. If you have a high application abandonment rate, lack of automation may be the culprit.
Automation—like allowing IDs to be scanned to prefill information and automatic record creation on core systems—can make or break the loan application process. This is especially true for existing customers whose data you can leverage to streamline their experience. Yet many lenders are still missing pieces of the digital puzzle. The Digital Banking Review’s “2020 Digital Lending and Account Opening Review” learned the following from financial institutions surveyed in 2020:
- 30% offered/had integrated cross-selling capabilities
- 30% offered under one-minute decisioning
- 25% offered OCR (optical character recognition) prefill
- 23% offered auto-funding (disbursement)
Loan Competition Rising
Other segments of the application process can also be streamlined via automation. In-application document signing, and instant approvals are expected in 2021 so, as more of your competitors and new, fintech, digital-first institutions provide this streamlined digital lending experience, the risk of banks and credit unions losing customers to them rises dramatically.
The Digital Banking Review’s 2020 report also showed that 66% of organizations were able to provide a complete online application from beginning to end compared to only 52% in 2019. Simplifying the digital lending process has become a focal point for many financial institutions, traditional and otherwise. The loan origination technology you leverage for digital lending and account opening is not a trivial consideration. Rather, it signifies how willing and able you are to meet your customers where they are and help them meet their banking needs with ease.
Digital lending is here to stay, which is why we created MeridianLink One: a platform that provides you with whatever combination of digital account opening, loan and mortgage origination, collections, analytics, and reporting software your organization needs. If your loan origination system does not have the right functionality and cannot be configured to provide a complete and streamlined digital experience, it will be increasingly difficult for you to compete in the digital era.
Diane’s Saga Continues…
In our next blog, we’ll see what the process looks like from the back-end — and how silos and hiccups in the transition to sub-servicers can impact the front-end for people like Diane.