Rethinking the Loan Application Process
At Connect, we have continual dialog with our credit union clients to ensure we deliver the ultimate online and mobile loan application user experience for their loan applicants. Today’s consumers expect an expedient application process with quick, if not immediate, decisioning on their loan application.
Loan processes that take 24-48 hours to complete the application cannot compete with companies that have efficient application, decisioning, and funding mechanisms in place. This is why many traditional lenders have lost their competitive edge to Fintechs and other online lenders. That loss of edge can be due to outdated systems, lack of underwriting processes, or a combination of both. If a lender is unwilling to implement systems and underwriting processes that can expedite the loan process, they will lose the loan.
An Online Process that is Not So Online
Most online loan processes have the functionality where the consumer is able to upload the requested documents for the loan. But what happens when the process that is supposed to be “online” requires steps outside that are offline? Loan application platforms that do not use digital signatures, for example, create friction that breaks the flow of the online process. Without the ability to digitally sign the documents, wet signatures are required which means printing, signing, scanning, and uploading the documents to the portal.
Breaking the online cadence of completing the application often results in abandonment of the application. This results in costs to the financial institution for an incomplete application and the loss of the loan to a lender with a better digital loan process. There is a longer term loss as well, since the consumer is unlikely to come back to establish any future financial relationship after having an unsatisfactory experience with the loan application.
Regulation and Speed
In today’s increasingly rigorous regulatory environment, lenders are tasked with creating a lending process that presents a pleasant and quick application experience while ensuring all regulatory requirements are in place. As a digital services provider, we at Connect recognize the need to provide a streamlined application process that collects all the required documentation and runs the identity verification before the approval can be delivered to a client. This approach guarantees a frictionless application experience and a funded loan.
Unified Process
Full integration of the online lending application with your credit union’s digital banking platform and core provides a more unified process. For existing members, account information can automatically pre-populate into the loan application to save time and increase accuracy. For potential new members, information provided in the loan application can flow through to the core to seamlessly create new accounts for non-members and can facilitate streamlined digital banking enrollment. Lenders who don’t have a unified process with this level of integration are hampered by inefficiency and accuracy challenges, while also causing frustration to applicants who are expecting convenience through a fully integrated workflow process.
Changing Expectations
Lending has changed significantly in the past ten years, and as such, loan business models need to be continuously updated. Those lending processes include an easy-to-complete application for the consumer and the ability for the credit union to quickly verify identity, run the required regulatory checks (which is an ever-moving target), and enable the applicant(s) to sign the loan digitally.
The process of winning a loan is more competitive than ever, with traditional institutions and Fintech companies fighting to book and disburse the deal. Look no further than the mortgage refinance and PPP loan experiences over the past year to prove this point. If a lender creates friction in the application process or the ability to get quickly funded, many other providers are eager for that consumer’s business. Changing consumer behavior from COVID means that an efficient and fully digital online lending process is now a requirement to be “considered” for the business. The post-COVID consumer mantra is “better, cheaper, faster.” Either a lender can meet this expectation or lose the deal to those who can.