The role of automating financial processes has now transcended as a very important giant cog in modern business architecture. According to a 2020 survey conducted by McKinsey & Co., 66% of businesses have fully integrated at least one business process. A particular sector where automation has taken a foothold is the loan origination process. By automating loan processing, borrowers and lenders can easily apply for and approve loans respectively.
While some businesses are making the mistake of hanging to legacy and conventional loan processes, mainly because they have no urgency to do so, many other businesses have taken the bull by the horns and taken full advantage of automation. The lending sector is projected to be the second biggest fintech segment by 2030 given the emergence of AI in automation. But let’s take a step back and review the loan origination process and the benefits of integrating credit origination systems into business infrastructure.
Loan origination allows borrowers to apply for a new loan, which is then approved by the creditor. The loan application process involves several stages, including eligibility assessment, loan application, and loan approval.
Loan automation addresses several pain points experienced in traditional loan origination processes, such as lengthy processing times, human errors, high operational costs, and compliance risks.
Below are the key benefits of incorporating loan automation into your business framework.
Key Advantages of Loan Automation
Increased Efficiency
Automation enables creditors to collect and analyze applicant information within seconds, including personal details, financial history, and employment history. Additionally, loan officers can access third-party data, such as credit scores, seamlessly through automated systems.
Enhanced Accuracy
One of the key advantages of automation is the confidence that data will be collected and analyzed with high accuracy. Errors in automation are minimal and typically only arise from human input. The automation system is designed to ensure that all supplied information is automatically verified and validated, which reduces data inconsistencies, enhances accuracy, and minimizes fraudulent activities. This leads to more reliable decision-making and smoother loan disbursement.
Automation also frees up valuable time for loan officers and staff, allowing them to focus on more strategic tasks, such as risk management and customer relationship building.
Cost Reduction
Conventional loan processes require substantial resources, including labor costs for hiring support staff and the time needed to complete various tasks. These factors contribute to the high cost of loan processing. However, with automation, lenders can streamline their operations and reduce the need for manual intervention. Several aspects of the loan process will benefit from cost reduction, such as data collection, document validation, credit limit assessment, and loan approval. Automating these areas can greatly enhance efficiency and lower operational expenses.
Better Customer Experience
Automating the loan origination process makes it easy and convenient for loan applicants to request and secure loans when they need them. This seamless process begins with a borrower uploading personal information via an application form on your landing page and continues with the uploading of supporting documents. Real-time loan tracking progress is another feature that enhances the customer experience. Additionally, prompt reminders and notifications keep customers informed and updated every step of the way. This user-friendly approach lays a solid foundation for building long-term relationships and decreasing the churn rate in the future.
Regulatory Compliance
According to a Deloitte Global RPA Survey, it is said that automation can improve compliance accuracy by up to 92%. Compliance is a rigorous and crucial aspect of the loan origination process, and being able to automate it is a significant advantage for lenders. This is because best practices must be adhered to consistently. Manual processes are often riddled with errors, leading to failed regulatory compliance. As a result, automating the process has ushered in a more efficient way of operating. Lenders can now quickly verify documentation and disclosures in real-time, ensuring they are 100% accurate and conform to regulatory requirements, thus reducing the lender’s risk.
Scalability
As the situation in the world becomes increasingly unstable, the volume of loan applications (both in the consumer and commercial sectors) rises accordingly. Manual processes often find it challenging to handle this efficiently. However, automation provides the scalability needed to manage large volumes of applications without compromising on speed or accuracy.
Integrating automated systems into your business infrastructure can lead to accelerated growth, allowing financial institutions to expand their operations and enter new markets with minimal disruption.
This scalability ensures that lenders can continue to meet customer demands and capitalize on growth opportunities.
Conclusion
As explained above, implementing automation systems offers lenders numerous benefits, especially in streamlining their loan origination processes for increased efficiency, enhanced accuracy, cost reduction, scalability, and better consistency. Integrating those systems into your business infrastructure not only drives accelerated growth but also ensures that financial institutions can meet customer demands and capitalize on emerging opportunities.
