Posted by MeridianLink | May 17, 2024

The Art of Automated Decisioning in Lending

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 authors and may not reflect the opinions of MeridianLink, Inc.  

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In this era of efficiency, where the click of a button brings entertainment to your screen, dinner to your door within minutes, and your favorite retail items arrive the same day, time has become an invaluable currency. Waiting weeks, or even days, for a credit union to underwrite a loan feels antiquated in a world that thrives on rapid service.   

The future of banking is being led by the expectations of millennials and Gen Z, who increasingly expect their financial institution to deliver seamless experiences. These digital natives crave fully contactless digital banking processes from start to finish. Whether it’s submitting intuitive digital applications or receiving fast, automated loan decisions, they expect the same level of convenience they enjoy in their day-to-day activities. 

With these expectations top of mind, ask yourself—has your operation mastered the art of fast, frictionless banking? 

By the Numbers  

The figures presented in the 2024 Capgemini’s World Banking Report paint a telling picture: financial institution (FI) staff typically devote a staggering 70% of their time to operational activities, leaving a mere 30% for meaningful consumer interactions. But there’s also encouraging news. Just over half of FIs anticipate using improved data/AI capabilities and actionable insights as the driving force behind transformative trends in the coming year.  

This forward-thinking approach is important when it comes to your lending operation. Deploying data-driven decisioning at various stages of the member lifecycle has emerged as a clear competitive advantage, transforming what might seem like a daunting canvas of operational challenges into a vivid and satisfying picture of borrower satisfaction. 

When we consider how FI staff are currently allocating their time and the clear frontrunner for 2024 industry priorities, one word comes to mind as the solution—automation. 

The Path to Progress  

Underwriting is a pivotal point in the lending process that can either elevate or diminish the borrower’s experience. While the initial application sets the tone, it’s the seamless and efficient underwriting experience that truly fosters confidence among borrowers. Here, lenders meticulously assess the risk profile of applicants, determine their creditworthiness, and ultimately make decisions on loan applications—impacting not only financial outcomes but also the financial wellness and overall satisfaction of borrowers. 

Unfortunately, underwriting is often plagued with manual processes that cause sluggish response times, limited availability during business hours, and capacity constraints, resulting in frustration among borrowers. Similarly, your instant decisioning may offer speed but lack the depth and accuracy required for thorough risk assessment. This can lead to missed opportunities, suboptimal lending decisions, and poor borrower experiences. 

As credit unions make strides toward embracing advanced automation supported by data in the underwriting process, they open the door to a new era of transformative benefits. The cutting-edge technologies and sophisticated algorithms inherent in these capabilities can swiftly analyze borrower data, including the relationship between your credit union and the borrower, financial history, and credit reports. By identifying key risk drivers and tailoring your credit policy and risk appetite within an automated decisioning framework, you can proactively mitigate risks and optimize your lending strategy for faster, more precise, and better-informed lending decisions. Not to mention the valuable time that can be given back to your loan officers, so they concentrate on strategic initiatives such as nurturing member relationships and delivering personalized service. 

The results can even lead to higher approval rates, decreased delinquencies, and improved capture rates—all supported by ‘round-the-clock underwriting capabilities! 

Partnering on Your Journey to Digital Growth  

Optimizing your loan decisioning with advanced automation is just one brushstroke in a multi-phase masterpiece of digital growth that must be carefully crafted over time to resonate with your credit union’s distinctive priorities, resources, and timing requirements. Every institution’s journey is unique, but they all have one thing in common: it’s a process that takes time and support. 

So, how do you get started? 

  1. Begin by taking a close look at your current systems. How digitally ready are you? What are your biggest priorities and pain points? Do you have a solid digital foundation to build upon? This introspective phase is crucial for making informed decisions and laying the groundwork for real change. 
  1. Once you have a clear picture, develop a blueprint that’s tailor-made for your institution. Begin with your solid digital foundation and map out a detailed plan for continuous improvement. Fine-tune your strategy so that each step forward brings you closer to your vision of success. 
  1. Then, it’s time to take action. But you don’t have to do it alone. Find a trusted partner who can guide you through the process, providing expertise and support every step of the way.  

Together, we can paint a brighter future for your institution—one stroke at a time. 

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