Navigating Consumer Lending Challenges for Profitability

Kylee Wooten
August 25, 2021
Read Time: min

How can FIs overcome retail lending challenges?

In today's competitive – and increasingly digital – consumer lending environment, financial institutions will need to find ways to adapt to changing customer expectations.

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Did you ever imagine a time that you could buy a car online and have it show up in your driveway a few days later? Today, many of the tasks consumers once did in person, like buying groceries or getting dinner from a restaurant, have been transformed by digitalization.

The coronavirus pandemic has only heightened this dramatic shift toward high-tech, low-touch online offerings. The disruption in retail has also affected retail banking. Banking customers want fast, simple, and easy. However, making this expectation a reality is easier said than done, as a typical bank or credit union’s consumer lending process can involve many different systems, people, and processes.

Many community financial institutions demonstrated their nimbleness on the commercial or small business lending side over the last 18 months with the Paycheck Protection Program (PPP). For financial institutions to participate in PPP, they had to become more tech-savvy to navigate changing customer needs and expectations throughout the waves of the pandemic. A similar transformation on the retail side will be necessary for success in consumer lending in today’s environment.

Lean into Digital Adoption
Automating consumer lending to become
more competitive and profitable

Retail banking is increasingly competitive, especially with the influx of fintechs like LendingTree and Rocket Loans. In this competitive digital market, community financial institutions will have to lean into digital adoption to satisfy customer expectations. Consumers can easily find information about the importance and ease of shopping for retail loans among online lenders and traditional financial institutions. So, how will your financial institution set itself apart and be the one the customer chooses? How can it compete?

The good news for community financial institutions is that they have already demonstrated their ability to leverage digital tools to create a better, faster lending experience. An important aspect to becoming more competitive, faster, and, therefore, more profitable in the retail lending space comes down to scalability. Manual, repetitive data entry, physical applications and signatures, and chasing customers down for additional documents waste valuable time for the lender and frustrates borrowers. For example, with the right technology, like a loan origination system (LOS), financial institutions can transform inefficient processes for a frictionless lending experience.

With an LOS, financial institutions can offer a fully digital retail lending experience to their customers, where customers can quickly apply for loans, securely upload documents, and electronically sign for a loan online anytime, anywhere. Mobile-friendly, customer-centric platforms put the consumer in the driver’s seat, allowing them to quickly and easily apply for their loan.

Meanwhile, the financial institution can perform quick analysis and automate the decisioning process with an end-to-end digital LOS, helping to ensure efficiency, consistency, and scalability. With an integrated customer relationship manager (CRM) to track the institution's customer pipeline and notify lenders of upcoming tasks and automated workflow templates, an LOS optimizes many areas of consumer lending. Banks and credit unions that can make fast, creditworthy decisions give themselves a much-needed advantage in a competitive consumer lending environment.

“With loan origination systems, you only have to touch the data once. One touch and it propagates,” said Marc Meoli, Solutions Consultant at Abrigo. The lender can focus on new banking relationships rather than chasing down documents and re-inputting the customer's information. “This is how an institution gains efficiencies and gains power,” Meoli said.

What basic functions should a loan origination system complete?
Learn more

Technology is important to driving efficiency but purchasing it doesn’t automatically make a financial institution more effective. It can be challenging to implement new technology, both from a technical and a change management perspective without proper planning.

A financial institution looking to leverage a loan origination system successfully will consider how it will integrate with other technologies already in place. Will this technology be another siloed system, or can it seamlessly integrate and “talk” with other software already in place? Cross-application functionality and software will allow for better data optimization and reporting and increase transparency.

A seamless system will also significantly help buy-in and usage among users at the financial institution. To further promote strong adoption of an LOS, users should receive adequate training and support from the technology provider. Managing “the people side of change” can help institutions maximize their LOS’s potential  

Increase Customer Loyalty
Fostering a Better Customer
and Member Experience

Many community financial institutions were able to gain new customers and members through their swift response to the Paycheck Protection Program (PPP). These institutions were the heroes of PPP, reacting quickly to the program and implementing technology to scale their processes to meet the high volume of applications. Being able to help these small business customers during a difficult time garnered a lot of goodwill and customer loyalty – but can institutions keep it? Can community financial institutions use the same approach they used to transform the PPP process for other areas of lending to foster deeper customer relationships?

A key part of that initiative will be moving away from siloed, disparate systems and investing in technology that enables a single point of data entry to help break down data barriers. Fully centralized and integrated data gives financial institutions better insights – from areas of risk to growth opportunities – to drive smarter, faster decisioning.

Centralization, automation, and efficiency gains are also important for better customer service. Banking customers have adapted quickly to their newfound remote lifestyles, heightening the importance of efficient, effective digital offerings. Going forward, financial institutions will have to make a conscious effort to deliver high-level service with remote delivery. Enhancing the customer experience means delivering on customer expectations with digital offerings.

About the Author

Kylee Wooten

Media Relations Manager
Kylee manages and writes articles, creates digital content, and assists in media relations efforts

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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