According to the Federal Reserve’s recent consumer credit report, US consumer debt rose in October by the most in 2018, indicating that Americans are borrowing more.
Credit card loans, mortgages, home loans, and credit inquiries have increased, which indicates a rise in consumer credit demand. Total loans have grown by 4.6% between Q3 2017 and Q3 2018, and the trend is expected to continue over the next several quarters.
As financial processes are shifting to online or mobile devices, customer experience is slowly becoming a major deciding factor in the success of financial institutions. There is also a shift from the transaction-based model to the more customer-oriented approach.
Now the focus is on proactively reaching out to customers through their phones, computers, and tablets. Although this process seems natural only in the context of customers buying products, it is applicable even when they seek loans.
However, traditional banking policy still considers lending a separate, standalone service and doesn’t consider an account holder’s total banking relationship. Conversely, customers think that you should know them enough to recognize and reward them with loans for their loyalty.
Also, though market conditions are favorable, customers still fear that they won’t qualify for loans. Therefore, if you use outdated marketing techniques, you may not be able to attract them.
Latest technologies, such as cloud services, automation, and artificial intelligence (AI), can help lending to be more holistic, relationship-based, and proactive. The 2017 PWC Global FinTech Report says that most financial institutions will adopt these soon.
Cloud services dispel the need for more on-premise investments in IT infrastructure. They reduce capital and operating expenses. As you don't need to buy or install new hardware, such software or platforms can be deployed quickly.
Cloud integration provides immediate access to all relevant information and also allows you to expand your operations without much difficulty. Moreover, software updates are fast and frequent, allowing you to improve your services continually.
Qualifications required for loans, including age, FICO scores, and income, can be automatically checked based on predetermined rules, which helps you to make quick decisions on loan applications.
Applicants who don’t have an active credit account may not have FICO scores. In such cases, you can check other creditworthiness information using AI, big data analytics and machine learning to analyze credit risk.
This democratizes the lending process, assists underserved consumers, and gives you a competitive advantage over traditional lending institutions.
AI and machine learning can help you use chatbots and algorithmic interfaces to interact with customers and send timely communications to them. They can also ensure greater security, by routinely checking risk factors and responding quickly to threats.
As more and more tech-savvy millennials seek loans, your service would be judged on the basis of access, convenience, and usability. You will have to implement cloud-based loan origination and servicing software and make decisions based on automated rules. You can do so easily by using an online lending platform.
Online lending platforms allow customers to apply for loans anywhere, anytime, and even without meeting a loan officer, which makes your services accessible to a broader audience. You can guide them through the loan origination process.
These platforms even allow customers to upload all required information, thus, making the loan application process hassle-free and affordable. They can also collect, interpret, verify and track large amounts of data in a few minutes. This will make your loan evaluations faster and more consistent. You can replace time-consuming, paper-intensive manual systems and processes with data-driven methods, thus, reducing errors.
The data they collect on the various aspects of your business will help you to understand what affects your bottom line and strategize accordingly. Overall, technology makes the lending process quicker, more efficient and successful. Software Lends a Hand in Loan Servicing