Lending
10/07/2016

On Your Mark….Loans Approved!


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Scene 1: Adam approaches a reputed bank in his city to get a quick loan to expand his restaurant. A month later, he is still waiting for a green light.

Adam tries his luck with a marketplace lender, and his application is cleared in minutes. The money is wired to his account in no time at all.

Scene 2: Stacy approaches her bank to get a loan to expand her digital marketing firm. She needs cash quickly. Although she is currently a customer of the bank, her loan application review process takes time.

She instead applies for a loan online with an alternative lender. Her application is processed and approved, and the money is wired to her account in the shortest possible time.

Here’s a wakeup call for the banking industry: Customer loyalty, which banks have relied on for so long, is now decidedly elusive.

Banks are getting hit by a triple whammy. First, increased regulations have made loan processing more complex, resulting in higher costs and reduced margins to originate loans. Second, banks’ legacy systems and manual processes lead to delays in loan processing and constrain banks from meeting the expectations of today’s connected consumers. Finally, digital disruption by alternative and marketplace lenders is putting pressure on banks, as customers now have other choices.

Coping with Increased Regulations
Regulatory oversight is increasing, be it recent guidance from the Office of the Comptroller of the Currency on prudent risk management for commercial real estate lending, or the upcoming current expected credit loss (CECL) model from the Financial Accounting Standards Board. How can banks cope with this new normal? By automating the loan origination process, banks can ensure that they are fully compliant, and at the same time improve their efficiency in originating the loan by cutting down on paper-intensive and manual steps. Banks should consider investing in loan origination software that not only meets current regulations but is also agile and flexible to incorporate future regulatory changes.

Improving the Origination Process
Legacy systems go by that name for a reason. They are built on old technology. These systems are expensive to maintain and hard to modify. Commercial loans contribute significantly to a bank’s business. Yet, due to outdated legacy technology, the loan origination process is largely manual, requiring duplicate data entry at multiple steps. To solve this, banks should consider investing in loan origination software that seamlessly integrates multiple disparate systems, such as document generation, spreading and credit bureaus. By doing this, banks can significantly cut down the time it takes to originate a loan, and meet the expectations of their customers.

Commercial loan origination software can help a bank streamline its commercial lending business. Here’s how:

  • The software seamlessly integrates with legacy and external systems.
  • It serves as a single application window to cater to multiple business lines, such as CRE loans, commercial & industrial loans, small business loans and leases.
  • It automates the commercial lending lifecycle from origination to disbursement to servicing, making processes paperless in an automated workflow environment with minimal manual intervention.
  • Loan requests are captured from multiple channels.
  • Credit scoring and underwriting of loans is efficient, due to seamless integration with third-party credit bureaus.
  • Automating and centralizing business rules allows quicker lending decisions.
  • Effective tracking and analysis of the loan process means the bank can better comply with regulations.

Imagine loan officers spending significantly less time reviewing loans. The end result is a more efficient process for the bank and, more importantly, happy customers.

Anand Raman