From application to loan servicing, sound decision making and speed are important considerations for credit unions no matter the size. With both revenue and profit margins being squeezed by competition and legislative reforms, each customer contact should produce the best possible return.
To that end, credit unions should look to better automation and consolidation in the lending processes in order to boost efficiency and reduce transaction costs.
Sometimes, the simplest things can be overlooked that over time can bleed a lot of revenue out of the lending portfolio.
Let’s look at the cycle to find potential gaps to close.
Initial Customer contact
One way to optimize returns is to perform a closer evaluation of the customer contact phase. It’s during this phase that basic information about the customer is obtained, loan product offerings are made and a determination whether or not the borrower can repay the loan is gleaned.
By running application “what if” scenarios, credit unions can harness the power of analytics to run multiple side-by-side scenarios and instantly see key metrics like credit score, DTI, expected return, probability of default, etc…
By comparing customer actuals vs. scenarios, lenders can pinpoint opportunities to increase their bottom lines.
Speed up origination & underwriting
Today’s borrowers expect to receive loan options, approvals and documentation in minutes as opposed to days. That requires credit unions to be nimble in optimizing the entire origination cycle across multiple verticals and channels with speed and efficiency.
Despite this, more than 47% of lenders indicate they have more than 50 personnel involved in loan processing. By implementing newer loan origination software and services, credit unions can manage more loans with fewer resources by automating workflows, tracking documents and integrating paper-free processing.
Many financial institutions get bogged down during the underwriting phase of lending, after all this is the key moment when a credit union determines whether the loan is a good risk for them as the lender.
The problem is the underwriting stage at most credit unions is still largely static despite Big Data advances. The key to adopting a more dynamic approach to underwriting involves:
-Adopt powerful, new analytics approaches that allow for rapid changes, and deeper insights
into borrower and portfolio behavior.
-Utilizing more data, more effectively by using information from new and often non-traditional sources.
-Enact more nimble internal processes to address regulatory needs.
Consolidation will be the buzzword for lenders that seek to avoid duplicating efforts across multiple loan products. That’s because managing the expense of supporting and integrating disparate platforms hurts the organizations in terms of profitability, operational efficiency, compliance and risk mitigation―and it can ultimately jeopardize borrower relationships.
Today’s technology landscape in the financial services industry often includes redundant, inefficient and incompatible systems that are increasingly costly to maintain. A better servicing solution supports all retail loan products on one platform and can store borrower data in one centralized place as opposed to many.
The benefits of this approach are better servicing of customers, reduced technology and operations costs and faster response time to industry regulations and policies.
Regardless of whether your financial organization is a high-volume based credit union or smaller lender, the right combination of loan consolidation processes and customer-orientated technology solutions should increase efficiency, minimize risk and position you for future growth.