Five Tips for Building the Best Loan Origination Process


Q2 has helped scores of clients transform their lending business – this is what we’ve learned along the way.

The lending sector is changing rapidly, for everyone. Taking more than a few hours or even minutes to deliver loans to customers isn’t a viable business model anymore. But neither is mainlining the digital and data agendas without due regard to risk. Most players in the lending game need to figure out how they can implement digital lending quickly, and responsibly.

The transformation from where you are now, to a tech-driven, intuitive, seamless, and safe lending experience is hard. Q2 has worked on hundreds of projects with organisations around the world to help them transform their business models, products and services, and introduce technology to improve the customer experience. And we know that the number one obstacle to success isn’t failure to understand the benefit of technology, or the complexity it can bring of the process, it’s fear.

It can certainly be a steep learning curve for our clients, but we’ve learned, and we know how to handle everything from coding to a crisis of confidence. So if you’re looking to change the way you onboard borrowers and lend money, then you’re reading the right blog.

Focus on the user’s application and onboarding experience

A successful lending model prioritizes the customer’s needs, a principle further underscored by the pandemic. While many governments have relaxed pre-loan check regulations, this has heightened the risk of fraud for banks. This doesn’t bode well for customers and complicates the transition to digital lending. However, a tech-driven lending system can expedite cash approvals for customers without compromising scrutiny.

Before embarking on lending process digitization, it’s crucial to understand your customers’ requirements. Engage them in discussions about their lending preferences, pain points in the current process, and apprehensions. Surprisingly, minor adjustments in technology and procedures can directly address their needs.

As one senior executive emphasizes, “Leveraging technology doesn’t depersonalize interactions; rather, it provides opportunities to be more insightful and personable.” To achieve this, it’s essential to map the entire customer journey, from initial contact to repayment, and utilize these insights to redefine service delivery.

Go easy on the data at first

Transformation programs often prioritize data utilization, but exercising caution is advised. Not all data holds equal value. When initiating automation and model training, start with reliable data already in your possession. Explore how various data points can synergize to yield deeper insights.

Additionally, maintain an open infrastructure. Validate models against past decisions, examining any disparities in outcomes. Determine whether such variances are beneficial. Once assured of the automation’s reliability and accuracy, incorporate new data points to enrich decision-making processes.

Rely on your relationship managers

The journey towards digital lending transformation presents challenges irrespective of organizational culture. It’s essential not to alienate your workforce. A robust loan origination transformation strategy begins by automating simple tasks, allowing relationship managers to focus on handling complex or exceptional applications. Digitization doesn’t replace your staff; instead, it empowers them to work more efficiently and engage in cross-selling opportunities. However, it’s crucial to involve them in the process from the outset.

As highlighted by a Chief Operating Officer at a prominent asset finance company, initial unease is natural. However, by gaining the trust of your relationship managers, involving them in the transformation process early, and listening to their feedback, they will recognize that their roles are being enhanced rather than replaced.

Cross the divide and remove silos forever

Developing a market-leading digital loan origination process necessitates collaboration among essential teams, including credit and underwriting. This ensures a harmonious balance between customer needs, business revenue objectives, and the bank’s risk appetite. By fostering synergy among diverse teams, rapid iteration and testing become possible, fostering confidence throughout the organization.

Know the way and show the way

Transitioning to digital lending is a highly intricate endeavor. Loan origination impacts every facet of the business, often lacking centralized ownership or oversight. A strong leader is indispensable to coordinate efforts across front office, IT, risk, operations, and other departments, facilitating the development of a streamlined process. The dissolution of organizational silos and alleviating interdepartmental tension are imperative. A leader capable of resource allocation, posing challenging inquiries, and continually advocating for digitization is pivotal for successful transformation and its sustainability.

Change management demands significant effort, best managed from the top. Entrusting transformation solely to system operators often leads to digital replication of existing systems. Implementation should occur at both strategic and functional levels.


About Gaurav Joy Dhingra

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