7 Strategies for Achieving Balanced Loan Growth – Part 6
Onboarding & Minimizing Friction: How to Get Customers In and Then Stick.
Over the last decade, tech giants like Amazon have disrupted every single industry, including banking. This has even prompted change within lending, with online lenders improving the loan application experience to meet customer expectations for convenience and speed.
Banks and credit unions must take steps to modernize their old, archaic approach or else risk losing market share. This is especially critical as more and more consumers seek funding from online lenders due to the fast, seamless, and oftentimes paperless loan application process. Their online application process typically takes less than 30 minutes, sometimes as fast as five. Even more, their systems have been designed to fund approved loans within just a few days. With basic credit requests, funds can be disbursed within 24 hours.
Comparatively, consumers who apply for loans at traditional banks cite frustrations with the “difficult application process” and “long wait for a credit decision,” according to the Federal Reserve. And can you blame them? On average, it takes a small business owner upwards of 25 hours to complete paperwork before obtaining funds.
This not only makes for a bad customer experience, but it also poses serious challenges for a financial institution’s profit margins. More often, financial institutions process a small business loan of $100,000 the same way they process a $1,000,000 commercial loan, which drives institutions to prioritize high-dollar commercial loans with greater profit margins.
However, by modernizing the lending process and leveraging technology, financial institutions can reduce the transaction costs for small business loans to boost profit margins and ultimately provide more funding to small businesses. Some banks and credit unions have, in fact, digitized part of the process, but there are still portions of the application that require a visit to the branch or mailing physical documents. Additionally, some institutions only offer a digital option for certain loans categories, like mortgages, personal loans and auto, according to the American Bankers Association.
Even of the banks that offer digital loans, an overwhelming majority (96 percent) have only digitized the application process. Financial institutions must also digitize document uploads, support e-signatures, and facilitate direct communication to customer service through digital channels like email or instant messaging. Replicating a paper-driven loan application process online won’t cut it, as it does little to improve the customer experience.
To offer the level of convenience today’s consumers demand, financial institutions must go beyond converting paper into a digital document and instead, digitize back-end processes, including minimizing data entry by providing pre-fill functionality within the online loan application and making obtaining loan status updates easy through a customer portal.
These initiatives will require effort, but advancements in current technology means that delivering a streamlined and more transparent experience is possible for institutions of all sizes. With the Baker Hill NextGen® Client Portal, the customer experience is improved by simplifying routine tasks and enhancing communications between you and the borrower during the loan application process, allowing bankers to provide dialogue and guidance.
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If you need to catch up on parts 1 through 5, you can click the links below:
Part 5: CECL as a Strategic Business Initiative
Parts 3 and 4: Deal Pricing and Efficient Loan Origination
Part 2: Efficiencies Needed within Accounting, Tax Returns & Financial Statement Processing
Part 1: CRM Systems Are Critical for Understanding Your Customers
You can also download the full eBook to find out all seven strategies today.
Posted on Monday, July 12 1:45 AM