Transparency Is Key in Your Loan Decision Workflow
Infusing speed and convenience into your financial institution’s loan decision workflow can dramatically improve the borrower experience. Still, a third consideration can help your institution differentiate itself from the competition. We’re talking about transparency.
It’s become clear that transparency in the lending process is equally as important as speed and convenience, but how can financial institutions deliver?
Read on for ways to build a transparent loan decision workflow for your borrowers and improve your digital lending experience.
Why Is Transparency So Important to Borrowers Today?
According to a credit survey by the Federal Reserve Bank of New York, borrowers that were unsatisfied by the lending process were often unhappy due to a lack of transparency. This was true across the board, whether borrowers applied at a large or small bank or through an online lender.
For large banks, 48 percent cited a lack of transparency throughout the process, and for small banks, the percentage was nearly the same at 47 percent. Online lenders did not fare much better, with 49 percent of borrowers desiring greater transparency.
As more institutions digitize their lending models and reduce manual, high-touchpoint processes through technologies like online loan origination software, there is less need for human interaction.
At the same time, this can make it easier for a customer to apply for a loan at their convenience, perhaps from their mobile device while at home on the couch. It can also make it difficult for the customer to obtain status updates on their loan application.
Consider this: Your financial institution needs some supporting documentation from a borrower. Your loan officers will likely have to make follow-up calls during business hours, times when the borrower may not be able to answer the phone or stop their activities from finding and submitting the necessary documents.
For many borrowers, it can also be challenging to understand the requirements of their loans, how they qualify, why they didn’t qualify, or what factors impact the cost of the loan.
Some borrowers apply for multiple loans from different providers, but many struggle to compare offers because lenders present terms differently. As a result, 40 percent of respondents in an Oliver Wyman study reported that it was “difficult” or “very difficult” to find a lender that offered the best terms.
Increase Opportunities for Engagement with Borrowers
One way to modernize your loan decision workflow is through digital lending technology with a customer or member-facing portal. Today’s consumers expect immediate answers and a 24/7 engagement touchpoint for borrowers enables this.
For customers that have a question about their loan application or want an update on the status of their application, a customer portal allows applicants to see their status in the loan decision workflow on demand, even from a mobile device.
As a financial services provider, you don’t want to place the onus on your customer to hunt down information for a status update; instead, you want your customer to feel like a partner in the process, not just another number. The increased connectivity of a portal supports this.
Leveraging a customer portal allows underwriters and loan officers to communicate with borrowers and retain that contact history. For instance, if a loan application is missing a document or a financial statement, the customer can be notified and then securely and easily attach the document via the portal.
Additionally, a portal with built-in messaging capabilities ensures your financial institution can resolve any customer concerns swiftly and ensures that the feedback provided is timely and relevant.
More Transparent Loan Disclosures
Beyond finding ways to increase the institution’s connectivity with borrowers during the loan origination process through tools like the customer mentioned above portal, financial institutions should ensure the terms of individual offers are clear. This will make it easier for institutions to differentiate their offerings from competitors.
While an industry-wide standard for offer presentations would help resolve this issue, individual institutions can start by avoiding jargon and using consistent terminology in their loan disclosures. Providing standard definitions of fees is also advised.
By disclosing loan terms clearly and consistently, banks and credit unions can empower borrowers to understand the loan offer terms better. This is also an excellent way for traditional financial institutions to highlight the lower rate they can offer compared to the rates offered by an alternative lender.
Don’t underestimate the importance of boosting transparency in the lending process, as it could be what distinguishes your institution’s offer from a competitor’s. Beyond that, the level of trust that comes with enhanced transparency in your loan decision workflow will help your institution strengthen relationships with customers and provide the absolute highest level of customer satisfaction.
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Posted on Thursday, May 31, 2018 at 1:15 PM
by Baker Hill