Among digital lenders, using technology to make the loan lifecycle more efficient is the ultimate “white whale.”
Although tech-first digital lenders are already using technology to shorten the loan cycle, without interconnected systems it can still be a time-consuming process. This ultimately hinders a firm’s ability to on-board new clients and disburse loans efficiently, harming long-term growth prospects.
But having that advanced right technology platform that integrates multiple data points enables these minor improvements that ultimately produce an enormous boost to speed, performance, and a firm’s ability to disburse credit and collect repayments.
In an increasingly crowded market, slow turnaround times can rob digital lenders of a significant competitive advantage.
Slow turnaround times create a kind of cascade effect a cascade effect in which the application and underwriting process is too long, so loans are approved and funded slowly, so clients and businesses seeking credit are forced to look elsewhere. This damages consumer confidence, hinders a firm’s ability to reach new clients, and ultimately significantly hinders growth.
What causes this? For many lenders, it’s simply because their core loan management system is inadequate as a central “source of truth”.
Often, even tech-enabled lenders use disparate platforms that aren’t properly integrated with the core system, requiring manual data uploads between platforms, or that rely on systems that don’t operate in real time.
This can lead to increasing costs as lenders are forced to pay for and maintain different systems and spend more time and resources on manual data processing and physical payment collections, making it difficult to disabuse credit and collect repayments.
This dramatically slows down the speed of loan processing.
It can also slow down credit assessments. Having these unconnected platforms make it more difficult to accurately assess a client’s creditworthiness, particularly when they lack reliable credit data. This is a major problem in rural and remote areas, in which people have previously been underserved by traditional financial services, or trapped in informal employment.
This, in turn, can expose a lender to risk, raising the potential of losses or being exposed to bad debtors and increasing the risk of defaults.
All this can have an enormous detrimental effect on customer experience, particularly during disbursement. Borrowers want fast, efficient service just as much as lenders do. This is vital in locations in which word-of-mouth is key for maintaining a lender’s reputation and winning new clients.
So how can lenders optimise the loan lifecycle, reduce costs, and improve efficiency? The answer lies in leveraging API-integrated technology, and utilising alternative data.
Digital lenders will often use a wide variety of different third-party and proprietary apps for loan origination, credit scoring, and disbursement, and these will have varying levels of interoperability.
Tech-enabled lenders, therefore, need an advanced solution like Oradian’s, which can perform most of the business-critical functions along the loan lifecycle, and enable an enormous number of API integrations.
For those firms currently using a relatively unsophisticated tech platform, an advanced solution like Oradian’s core system can make an enormous difference.
Acting as a single source of truth, Oradian can allow firms to collect, input, and analyse enormous amounts of client data to build an accurate and holistic picture of their creditworthiness and ability to make timely repayments.
Using advanced API integrations, lenders can also connect third-party applications and services to their core system, allowing them to rapidly and efficiently feed client data into their core, producing a wide variety of useful alternative data.
For instance, they can integrate a smart application form that automatically uploads data to a customer database, significantly reducing the time spent on loan origination and producing useful information for credit assessments.
The “alternative data” an advanced core system generates allows lenders to bypass traditional forms of credit scoring, thereby enabling them to offer credit to underserved and rural customers who may lack a credit history.
They can also integrate a wide variety of platforms such as mobile applications, data analytics platforms, messaging apps, and accounting software that allows them to eliminate as many manual data inputting and collecting processes as possible.
This can significantly speed up every step along the loan lifecycle, allowing them to originate, assess, approve, disburse and collect in record time.
Ultimately, reducing loan cycles is all about getting more credit to more clients in a faster, more efficient way. These reductions can be felt across the entire cycle, and can have a huge cumulative effect on growth and performance.
Automating tasks, improving efficiency, and connecting disparate data sources to produce holistic client insights gives firms an invaluable competitive edge. By selecting the right platform and the right partner, lenders can optimise their lending process and remain competitive in an increasingly crowded industry.