Digital lending is using online technology in loan processes. It includes a bank or credit union offering an online loan application on its website. It also entails fully automated lending platforms that streamline loan processes, like digitized lending materials.
Digital lending is not a new practice. You probably understand the basics quite well. However, modern technology advances quickly, and consumer expectations evolve.
Nowadays, customers expect banks and credit unions to process applications quickly and make decisions fast. For this reason, financial institutions have to provide customers with digitized means that go beyond the ordinary to keep pace. But why exactly is digital lending essential to financial institutions?
Why should you care about digital lending in your financial institution?
Digital lending improves the customer experience in your financial institution. For example, a bank can include all loan information in a digital lending platform. As a result, it facilitates effective communication with potential borrowers regarding the details they need upfront before applying for a loan.
Effective communication enables financial institutions to be transparent, a great way to satisfy and engage customers. It also reduces the instances of incomplete loan applications that usually delay the review process. That means your financial institution will process loans faster and reduce customer frustrations during the application procedures.
Digital lending overcomes geographical barriers that may prevent a bank or credit union from reaching a bigger audience. It enables digital loan origination. Borrowers can apply for loans online, sign documents on their phones, or scan checks from the comfort of their homes. This is an advantage to customers that financial institutions can use as a value proposition to attract a new audience.
Digitizing the loan processes comes with huge benefits for the entire credit team in a financial institution. Many platforms allow loan processors to collect third-party data through a central interface.
For example, banks and credit unions can access credit bureau reports and borrowers' financial information through a single interface, eliminating unnecessary manual procedures and errors. The result is faster loan processing and decision-making.
Some lenders often use shallow assessments and estimates to make decisions that may negatively impact the institution. The good news is that digital lending platforms give you insights into your lending information.
As a result, you make decisions based on actual data in your bank or credit union. For example, the platforms give you access to customer acquisition funnels. You discover what works and what doesn't to make improvements that drive positive results.
As digital lending competition becomes fiercer, lenders have to leverage new technologies that turn borrowing into a fast, painless process to remain competitive in the industry. However, digital lending platforms come from different providers, and each platform has specific features.
The right digital lending platform should fit the needs of your financial institution. Powerful digital platforms, like Co.tribute, promote the following best practices in digital lending processes:
The digital lending solution should give you real-time insights into borrowers' creditworthiness based on their credit scores. Most powerful digital lending solutions can verify borrowers' information through various financial databases, and as a result, you only lend to customers with a good credit score to avoid losses.
In other words, leverage digital lending platforms with complex statistical models that support real-time credit decisions when lending money. Doing so will help you eliminate the bad risk from the business equation.
The right digital platform should streamline consumer and commercial loan origination. Clients should be able to upload all the necessary details and documents online.
You should include modern loan application experiences that borrowers expect in your loan application process. For example, the borrowers should be able to sign important documents online (e-signing) for a seamless application process.
In addition, you should have automated notifications that remind customers to complete partially filled applications. That way, you get a chance to increase the number of borrowers in the financial institution.
The right digital lending platform should help you get return customers in your bank or credit union. For example, Co.tribute helps you display personalized loan recommendations to existing borrowers to increase the chances of making them repeat customers.
The digital lending technology also simplifies loan applications for return customers by automatically pre-filling forms with existing client information. The result is improved customer experience.
Leverage a robust digital lending platform that provides you with essential analytics to make informed decisions. For instance, the platform should give you insights into client acquisition funnels. These insights help you identify and fix flaws in your onboarding process to obtain more qualified borrowers in your financial institution.
The digital lending platform you use should offer next-level integration with Know Your Customer (KYC) solutions and core banking platforms. As a result, you fully automate workflows in your financial institution. For example, deposit and credit processes will have interfaces to the institution's general ledger and reporting systems to eliminate unnecessary manual work.
Some digital lending platforms, like Co.tribute, allow you to show potential borrowers the positive stories related to your bank or credit union. For example, powerful platforms allow you to capture and display customer-generated content on a branded digital board. This content can be positive testimonials that attract new customers to a financial institution.
Blending digital lending channels with physical requires extra diligence regarding privacy and security. The digital platform you use should be able to verify customer information quickly and accurately. The information includes the borrower's income, employment, and identity. An example of an identity validation feature is biometric scanners.
With the rise of digital loans, transparency is more important than ever. Banks and credit unions should include details about the digital lending materials, application procedures, requirements, fee structures, and timing on the digital lending platform. Alternatively, your financial institution can compare loan options on the digital platform to help borrowers choose the loan packages that are right for them.
Additionally, you can share post-approval loan information with the borrowers to ensure both parties are on the same page.
Save and resume functionality allows borrowers to save details automatically at any point in the application process and resume later. Applicants may not have all the information when they start the borrowing process. For this reason, a digital solution that saves details at any point may help you streamline the customer experience and mitigate abandoned applications.
Digital lending is increasingly popular. According to a recent study, 78% of Americans prefer to bank digitally through bank websites and mobile apps, bringing one thing to a clear perspective.
You're missing out on onboarding more clients if you aren't leveraging a digital banking platform in your financial institution. Our powerful digital lending software, Co.tribute, has all the features you need for result-oriented digital lending.
Co.tribute helps credit unions and banks in many ways, including;
Schedule a demo today to enjoy the benefits of digital lending.