The COVID-19 pandemic pushed financial institutions to adapt and create a digital presence. Financial institutions have been forced to re-think their operations that have gone remote, thus learning to modernize their products and protocol when shifting to a digital sphere. Although banks are lagging behind large fintech operations, the modern technology that they have recently been adapting is cutting down prices with new forms of analyzing and processing data.
What are the next steps that financial institutions must take? As consumers have adjusted to a completely digital space, banks must accommodate by delivering credit options instantly. No more 3-5 business day processing – traditional waiting is also coming to an end.
Why digital lending?
Digital lending is the usage of digital platforms to apply and renew loans online for a faster and more efficient decision. In the past, digital lending offered basic online loan applications. Consumers could apply for a credit product online for preliminary steps that would later, in turn, need a visit in-office or at a physical branch. Today, the definition of digital lending has changed: digital lending is an entirely automated platform that allows a lender to complete an entire credit application digitally. From the borrowing to the disbursement process, this process truly defines “digital”.
In order for financial institutions to implement a fully automated platform, their digital lending platform must have a full suite of software including an online loan application, document capture, electronic signatures, credit analysis, loan pricing, loan decisions, and loan administration.
To take an insider look at digital lending, we reached out to two CEOs that are leading digital lending technologies and staying ahead of the curve.
COVID-19 as an accelerator for developing digital lending
The coronavirus pandemic rushed banks to push all activity online once lockdowns began. There have been branch closures across the nation, and some customers may no longer feel comfortable going in-branch due to the pandemic.
When the banking industry was distributing Paycheck Protection Program (PPP) loans, it was abundantly clear that online deposit account opening and loan origination solutions were in high demand, says CEO of MKDecision, Har Rai Khalsa. Companies like MKDecision are even taking the next step when going digital. Cloud-based dashboards are personalized for individuals and offer solutions that streamline manual processes and allow customers and bankers alike to digitally access information.
According to AK Patel, CEO and Founder of Lendsmart, digital first is the only way to survive and compete. Because COVID has forced banks to rethink and accelerate their digital lending initiatives, banks have run into trouble accepting and processing the high demand of borrowers searching for loans online. The rapid loss of jobs across the sector has made demand unprecedently high when banking technology was not prepared.
The recent change in consumer expectations
The younger generations are becoming more credit active. According to a study from TransUnion, 50% of “credit active” Gen Z’ers in the United States owns a credit card. Millennials and Gen Z consumers are dominating the cardholder market and they expect access to their bills, account statements, and any other banking information digitally.
Consumers are now seeking digital experiences for all their banking needs. Low interests have increased home buying and refinance at all-time highs. “Borrowers need to be able to apply for a loan, send their data and documents, and even close 100% online. Companies like Lendsmart offers an end to end digital lending experience for both the borrower and the lender,” says AK Patel.
A digital era for banking calls for Fintech innovation. Advances that leverage data and technology to determine consumer preferences, understand consumer activity, and provide products completely digitally are already happening amongst Fintech companies and large financial institutions. A new digital norm is taking place to replace traditional banking.