Among banking journeys that have been digitized in recent times, the evolution of loan origination systems (LOS) is one that offers great value and convenience for a bank and its customers alike.
Long story short, a LOS helps a bank reduce the effort and time involved in processing a loan while ensuring that a customer gets their money as quickly as possible!
Here are a few reasons why a solid Loan Origination system is a must-have for banks to maintain a competitive edge in the digital banking space.
What is a LOS?
Loan origination is a process that borrowers go through to receive a loan. This includes pre-qualification, application, processing, underwriting (cross-checking), credit decisioning, quality check, and funds disbursal. A LOS converts the aforementioned process into one that can be completed seamlessly across different channels and devices in a fraction of the time with little or no personal interactions from anywhere.
So, why is a LOS so important for banks?
Today, apps could be considered the digital face of a bank. A good app is one that addresses the needs of a digital-first customer. This implies that user journeys must be end-to-end, omnichannel, intuitive, user-friendly, delightful, and deliver a sense of value every time. And the reason why it is important to have a good app is – all it takes is just a few minutes for a customer to dump an app and download one from another service provider if their expectations are not met quickly! A recent study conducted by McKinsey observed that around 60% of borrowers expected a loan origination process to be fully online and 15% of them ended up disappointed when the loan decision stayed uncertain after 10 days.
Collaborating for Success
As digital technology transforms all business landscapes, we have seen the rise of several approaches that help in building solutions with quick time to market. Some of them include the use of state-of-the-art workflow systems that leverage microapps, microservices, and several other technologies to name a few. Using these, banks/service providers can build solutions that are flexible, resilient, and cost-effective in comparison to expensive, difficult to maintain and manage, proprietary on-prem monolithic legacy solutions.
This also implies that a solution can be seamlessly integrated with disparate third-party systems and APIs that facilitate quicker reconciliation of data, automate verification processes, maintain compliance regulations, and mitigate fraud.
When it comes to processes such as know your customer (KYC), integration with an entity that is authorized to perform the check becomes vital. KYC systems easily verify IDs, documents, and other regulatory / compliance-related validations that enable a customer to successfully apply for a loan. So is the case when it comes to credit scoring, background checks, and everything else in between.
In recent times, if one were to observe the success behind the top banks in the world, we could easily see that adoption of automation strategies has been one of the key driving factors.
A well-designed digital LOS integrated with powerful AI and ML-driven systems not only automates repetitive tasks such as entry and extraction of data with robotic process automation (RPA) but also
prevents fraud, notifies of any anomalies, and mitigates risks with high levels of accuracy through pattern analysis and data mining.
To put things in perspective, if all systems needed for an end-to-end loan origination were designed inhouse with proprietary software, precious time would be spent while each module / function communicated with an external system to receive a go-ahead to proceed to a subsequent stage in the overall process.
Zero Downtime for being Future Ready
As Cloud-based technologies become increasingly prevalent, banks are opting for several approaches (Cloud-native, hybrid-Cloud, etc.) to build, scale, upgrade, and deploy their solutions. This implies that banks can purchase what they need when they need it from a Cloud service provider without having to bear the burden of maintenance and support or the risk of not scaling in size when it is required.
This implies that a bank can pick and choose the functionalities it needs and integrate them into a single interface to ensure a streamlined origination journey. Additionally, a Cloud-based solution ensures almost zero downtime, the easy rollout of new updates, real-time visibility, and a host of other aspects that enhance user journeys.
In Conclusion
Over the past few years, we have witnessed a fundamental shift, where offering fully digital solutions has become essential to attract and retain customers. The adoption of an end-to-end digital loan origination system will go a long way in helping a bank to delight a customer, gain trust, and build long-lasting relationships.
To see how Appzillon can power your lending journeys or to learn more about how we have helped banks with our LOS, get in touch with us at marketing@i-exceed.com.
