Keeping up with a changing lending scene
Despite many advances in digitization and automation, many financial institutions still fall behind in digital lending.
- It typically takes 1 hour to complete a conventional loan application. Digital lenders do it in less than 15 minutes.
- Around 30-40% of the loan origination effort is spent on non-core and automatable tasks.
- The average time to process business loans is between 3 to 5 weeks with time to disbursement at nearly 3 months.
- Digital lenders make decisions faster, taking only 5 minutes to process and less than 24 hours to cash.
What are the signs your lending processes are broken?
Here are some obvious (and not so obvious) signs that indicate broken lending processes:
- High abandonment rate - a high dropout rate for online loan applications can indicate a larger issue - redundant data entries, manual document submission, and long wait times all contribute to a poor loan origination experience. According to Forrester, abandonment rates can reach up to 97.5% if processes are not optimized.
- Long Time To Yes (TTY) and Time To No (TTN) - slow decision turnarounds negatively impact the borrower experience and hurt your revenues.
- Inefficient underlying processes if your lending teams are spending 30-40% of their time and effort on non-core activities such as data collection and communication bottlenecks, then this may be a sign that your processes need to be optimized.
- A low share of wallet - the average consumer holds 7.4 financial products, of which only 2.8 are with their main bank. A low share of wallet could be a sign of dissatisfaction with lending processes, hence customers look elsewhere for financing options.
Why is broken lending a threat to banks & credit unions?
With lending at the heart of most customer-bank and member-credit union relationships, poor lending processes can have a huge impact on your business.
Recent research indicates that unless applicants can complete a new loan application in less than 10 minutes, the abandonment rate can increase up to 60%.
Missed revenue opportunities
A survey revealed that many organizations are losing more than 75% of the potential loan business in a given year, a number that is not sustainable for banks and credit unions with high growth ambitions.
Increased risk & cost
Manual data collection, validation, and storage result in more errors, longer turnaround time, and higher operating costs. It can also affect your bank's ability to spot non-performing loans early, increasing cost of risk.
Drive better revenue from loan origination
Achieve remarkable results by re-architecting lending around your customers and members.
With one in every five loans coming from an existing customer or member, it’s easy to see that cross-selling just works. While traditional marketing and referral sources are important, reaching out to customers that you’re already serving with relevant product offers can help you drive more applications at a lower cost. Your move: Send personalized recommendations to existing customers through their banking apps to drive more applications and increase your share of wallet with Backbase Digital Engage.
Interest rates are the #1 criteria applicants consider when selecting a lender. While not all lenders can compete for the lowest interest rates, banks and credit unions can still win the race as convenience and speed of process are also critical factors in choosing a lender. Banks and credit unions who invest in a good borrower experience and transparency through digital data collection, real-time data analysis, automated steps, open banking, and more will gain an advantage over their competition. Your move: Provide a fast and frictionless loan origination experience to delight your customers and members with Backbase Digital Lending.
When building digital transformation strategies, banks and credit unions sometimes put too much focus on customer experiences while underlying credit processes take the back seat. Not streamlining your whole operation not only fails to solve the problem, but it might also make it worse. This scenario results in applicants being greeted with a delightful experience but wait around for months with multiple back-and-forths. Empowering employees with automation and digitization is crucial. It cuts down the turnaround time, increases efficiency, and meets the current demands of your customers. Your move: Speed up decision-making, increase accuracy, and lower your cost with Backbase Digital Lending.
Today, there’s a point solution for every aspect of lending. But point solutions bring the same silos and complexity that are currently weighing on banks and credit unions. Using a platform allows you to start small, from simple loans and credit products to more complex offerings. This also speeds up your development, allows you to reuse what you've built, and works with the finest fintechs. The result is a seamless and consistent customer experience across all lending, credit products, and lines of business. Your move: Choose a unified architecture and get ahead in today's competitive digital landscape with the Backbase Engagement Banking Platform
3 drivers for lending transformation
- Faster credit decisions, lower cost to serve. With 30-50% less time spent on decision-making, customers and members get cash up to 80% sooner.
- Increased profitability. A bank with a balance sheet of $250 billion can capture close to $230 million in annual profit through cost efficiencies and revenue gains.
- Tap into new markets. Banks and credit unions with the right digital lending capabilities can take on the unmet financing need in the small, and medium-sized business sector, a $5.2 trillion a year opportunity.