Making the transformation to digital lending is not optional for banks and credit unions. It’s the expectation of customers, who want faster and easier borrowing experiences. It’s a requirement for competing with fintechs that got there first.
But it will take more than a technology upgrade to make it happen. That’s a key takeaway from a new report by the owner and publisher of the Digital Banking Report.
The Future of Digital Lending by Jim Marous, lays out the rethinking that has to occur along every aspect of legacy business processes, from internal loan operations to back-office operations and customer experiences that will drive loyalty.
"In other words,” Marous writes, “while the focus on customers remains as strong as ever, the underlying components needed to create compelling borrowing experiences have changed.”
Technology Competency & Partnerships
New technology, including the cloud, robot process automation (RPA), machine learning, artificial intelligence (AI), and the Internet of Things, are all needed for digital transformation that provides the best customer experience, but financial institutions also have to upgrade their culture to support the workflows these new technologies enable, according to the report.
That means banks and credit unions must help employees acquire the technological competency and skill needed to prepare for this transition, the report says.
Legacy financial institutions must also develop strategic alliances and partnerships with third parties to simplify business operations, make the best use of data, boost revenue, and improve the customer experience.
These third-party partnerships bring outside perspectives and market-tested solutions that can shrink the time and cost of achieving digital transformation, compared to in-house efforts, the report notes.
The biggest challenge to creating state-of-the-art digital lending offerings is inefficient back-office processes that impede the customer journey and don’t make use of data, analytics, new technologies or automation.
One way to significantly enhance the customer journey is by simplifying interactions and speeding up processes with intelligent process automation, redesigned processes using machine learning and RPA to remove “repetitive, replicable and routine” back-office tasks.
The challenge is to integrate smart automation that works as well for borrowers as it does for financial institutions.
Banks and credit unions can use smart automation to manage data and insights better, support compliance, detect fraud, improve conversational banking, and make the most of their employees' skills.
“Leveraging internal data, modern technology, and automation, financial institutions of all sizes removed friction from processes and reduced the cost of delivering credit,” the report says.
Importance of Data-Driven Decision Making
For banks and credit unions that want to improve operations and become digital banking transformation leaders, data-driven decision-making holds the key. Financial institutions can make better and faster lending decisions by combining increased data flows, artificial intelligence and machine learning, connected devices, and cloud computing.
“Building a strong data-driven operational foundation for lending transactions and processes will define the digital banking winners going forward,” according to the report. Simplifying the back-office to support customer experiences that are fast and simple, will enable legacy financial institutions to compete successfully with fintechs.
Other experts agree. Banks and other financial institutions must effectively harness and analyze data about their customers, loans, and deposits to support their strategic decision-making, according to an article from Baker Tilly, a CPA and consulting firm in Chicago. However, to do this the leaders of financial institutions must commit to providing the funding and human resources necessary to collect and manage the right data.
“"The key for data analytics to be successful, however, is a leadership team committed to developing this data maturity mindset, whether internally or with help from a third party,” the article says.
Future of Digital Lending: Get the Report
To learn more about how MeridianLink mortgage and consumer loan origination software (LOS) can drive your banking and credit union digital transformation efforts forward, contact one of our digital lending experts today.