The pandemic has amplified the need for digital processes across all financial services to reach consumers and businesses beyond branches. Never has this been more evident than what we saw in lending when small businesses reached out to their financial institutions, including credit unions, seeking Paycheck Protection Program (PPP) loans this spring. Many lenders had not upgraded their digital lending processes and found it difficult to deal with the volume of requests.

Increased digital usage is here to stay

What we’ve learned from the pandemic goes beyond addressing the lending needs of small businesses associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s PPP and loan forgiveness programs. Digital usage has been amplified in every aspect of financial services, across all segments.

Members who were once reluctant to use online or mobile apps have entered the digital environment out of necessity and now recognize its simplicity and convenience. Many members will continue to use digital solutions even after the coronavirus (COVID-19) pandemic.

Recent BAI Banking Outlook research focused on the pandemic’s effect on digital banking. When asked about returning to the branch as the preferred method of conducting certain activities post-pandemic, only 41% of consumers chose the branch for “applying for a loan” in August 2020, versus 47% when asked in January 2020.

Borrower engagement in digital lending

It’s increasingly important that a comprehensive digital loan origination system (LOS) accommodate engagement with the borrower from application to closing. The end-to-end loan origination experience must be simple and give the borrower a clear digital path to features supporting the exchange of documentation; required signatures and authorizations; a borrower view of the status, approval, or denial communication; and exchange of funds at closing.

‘Old methods of serving borrowers are no longer an option.’

Susan Griffin

Dotting the "i's" and crossing the "t's"

Analytics used in the interpretation and validation of the borrower’s data are crucial in the underwriting and decision process and confirm that credit approval standards set by the financial institution are met.  

A single platform with intelligible workflow management can help users navigate automated processes defined by the loan type and customer or member segment, introducing human collaboration when needed. This can ensure a superior borrower and lender experience, which is key to relationship management.

As important as engagement and communication are to the digital lending process, so is the efficiency of the platform itself. A single solution can minimize the number of integrations and touchpoints that many lenders fall victim to when trying to piecework multiple platforms designed to perform various components of the loan origination process. This simplifies responsibilities associated with software maintenance and mitigates vendor risk. All this results in lender process improvements and efficiencies associated with costs, time, and training.

No longer an option

Digital lending was already trending in financial services, but 2020 escalated the need based on the challenges institutions face in a low interest rate environment and limited exposure to their customer base. Adding to these challenges is the continued advancement of alternative players online and big tech platforms expanding their loan offerings. Highlighting the benefits and efficiencies offered by a digital lending platform are more important than ever. Old methods of serving borrowers are no longer an option for lenders that want to remain relevant in a highly competitive environment.

Adopting an efficient, scalable, comprehensive lending platform can empower credit unions to use their personal touch in this digital transition.

For more on digital lending, check out the whitepaper "Digital Lending: 7 Timely Benefits You Can't Ignore."

SUSAN GRIFFIN is a senior analyst with Jack Henry & Associates.