Financial institutions know that successful digital lending requires the transformation of their business models as well but face key obstacles to making it happen.
As 2022 approaches, digital lenders must align their back-office operations, business decision-making and support with data and applied analytics, according to The Future of Digital Lending report by Jim Marous, owner and publisher of the Digital Banking Report.
Although it was important for organizations to provide customers with a comprehensive digital lending experience for mortgages and consumer loans before the pandemic, it's even more critical now as banks and credit unions won't succeed and thrive running legacy lending processes. Rather, they must respond to the needs of their customers and offer competitive opportunities in real-time.
"The challenge most organizations will face going into 2022 is to determine the prioritization of initiatives when so much needs to be done," the report says.
Most lending institutions don't have the necessary technology and talent internally to make these all-important changes. And too often, both the culture and leadership are out of sync with what has to be changed.
Meanwhile, change is happening “faster than ever before” and is only going to get faster, the report says.
Here are six key recommendations from the Digital Banking Report:
1. Support Intelligence Lending Workflows with Data
Banks and credit unions need to rethink how they collect and use data. Previously, organizations used most of their data to create reports that help management understand how well they were meeting their annual goals. In the future, lending institutions should use data and applied analytics more broadly across the business.
Using data as the basis to reimagine intelligent workflows will simplify processes that directly improve the customer experience, according to an IBM report. Implementing applied analytics throughout the business is also recommended to enable employees to provide more personalized digital experiences for their customers.
2. Establish a Culture of Innovation
In addition to upgrading technology to support a digital lending transformation, organizations must continually improve their current products and services to create a better customer experience. Financial institutions that don't will likely lose customers to fintechs and big tech providers.
3. Understand the Customer Journey
Although the transformed, digital lending process should take the customer experience into account from the beginning, many financial institutions don't seem to understand how the experience they're delivering falls short of a top-notch digital experience.
"When banks and credit unions ask, 'Where should we start?' I always recommend starting with making the digital borrowing process faster and simpler," Marous writes. "When fintech competition (and some legacy financial institutions) can process loans in minutes using only a digital device, as opposed to a process that currently takes 15 minutes or days for a loan, the performance gap is massive."
4. Prepare Teams for a Digital Future
As lending institutions transform to digital-first organizations, the skills their employees have also need to change. Consequently, banks and credit unions must hire people that are ready for where the organization is going rather than bringing on employees to fill past roles. It's critical that they add people with digital/analytical skills and varied management backgrounds.
In addition, organizations must reskill and retrain current employees for the digital future, which may include shifting duties from transaction processing to customer service and/or engagement.
5. Embrace Change
To be successful, lenders must meet the ever-evolving needs of prospects and customers as well as provide first-rate digital experiences. The key to accomplishing these objectives is digital lending transformation.
6. Team Up with Third-Party Solution Providers
"Speed to market will define digital lending winners," according to the Digital Banking Report. However, financial institutions shouldn't embark on their digital loan transformation journeys alone, particularly when they can team up with qualified banking solution providers or fintech firms that can help them operate more efficiently, improve the customer experience, and save money.
Transform & Thrive
"The speed and extent of digital lending transformation will determine who thrives in the new lending ecosystem, with the ability to leverage data, analytics, human resources, an innovation culture, and modern technology being the differentiator," according to the Digital Banking Report.
While economic hardships have always resulted in innovation that transforms organizations and their business models, the COVID-19 pandemic has certainly accelerated digital transformations, according to Mark Foster, senior vice president of IBM Services.
"Every company should now realize that technology is fundamental in the way that the company interacts with its employees, its customers and its stakeholders," he says.
Download the Future of Digital Lending Report
As sponsor of the publication, MeridianLink is making a limited number of copies of the Digital Banking Report, which retails for $495, available here at no charge.
To learn how MeridianLink solutions can accelerate and smooth your path to success, contact one of our digital lending experts today.