Growth cannot be achieved by compromising the quality of the loan portfolio by any lender. A risk-based approach is adopted after due diligence of the credit assessment report of a borrower’s risk profile.
The advent of AI with the new-age loan origination software is disrupting the cumbersome manual process of a loan cycle. Time is taken for borrower’s data collection, reviewing an application for missing or fraudulent information, financial spreadsheets, and risk modelling, the disbursal, and monitoring of the loan is fast, efficient, and free-of-human errors.
Installing a change in the loan solutions system is capital intensive. A bank has to close a good deal after checking a few critical features in a promising LOS. Let us examine a few of these features that are highly essential:-
Easy To Use
A good LOS will be easy to use by any person who has basic computer skills. A borrower cannot be expected to understand the beta versions of any software. The system should be backtested for the features it claims to perform. It should not have any break-points and the automation should be flawless.
The LOS system has to integrate all the functions and service stages of a loan. Right from the origination of loan application, credit approval, disbursal, and monitoring to the closure of the loan have to be serviced through a single platform. A system that was engaged to solve manual loan generation problems should not be a source of more problems. A single interface that allows the borrower to experience a seamless experience in: – filling in personal information, uploading required documents, and interacting with chatbots of support teams from the origination to the closure of the loan is the solution for any lender.
The backend of the LOS that can be accessed by various loan servicing departments of the lender should be able to:- communicate, read the analytics, disburse loans as per the recommendation generated by the software, and track and monitor the loans for changes in the ability of the borrower and close the loans when the final payment is completed. All this has to be serviced by a single LOS.
Compliant With The Regulations
Credit growth is synchronous with a booming economy. But for sustainable growth, risk mitigation is imperative. The financial meltdown of 2008 cannot be forgotten in haste. A consortium of banks globally designed a regulatory accord that is popularly known as Basel III. All the major banks and lending institutions that are under the watchful eye of the federal regulator follow these reforms and update their systems to meet the requirements.
A loan origination system that runs the applications through a quality control set to meet all the requisites of the regulator, can be recommended for its compliant features.
Single Unified System
Banks have different loan products servicing different needs of the borrower. The features and qualifications differ from one product to the other. Any bank would like to use a single system for all the different types of loans that they offer:- student loans, consumer credit, home mortgages, commercial credit, car loans, etc.
The economies of scope and scale can be utilised by using a single unified system for LOS. Consider the case of a student who has been paying his loan in time and maintained a healthy relationship. Whenever he/she graduates and starts working they may need a car and house. These loans can be offered by the system automatically in all the digital communication systems the borrower uses. By the click of a button, the borrower will express his intention to either go ahead with the new loan offer or reject the idea for now. A holistic view of customer management can enhance their experience and engage them in longer relationships.
Support And Maintenance
Banks understand the needs of their customers and customise their products to meet their end-end requirements in a life cycle. Likewise, banks that will be sourcing the Loan Originations Software from a technology provider, need someone who understands their workflow. The coders of the software have to step into the shoes of bankers and design the system from a lender’s perspective. Minimum to no-human intervention in the stages of decision-making of a loan application has to be enabled by deep neural networks.
The system should not stop working at any stage of the day. The idea of digitised lending software is to make it accessible 24/7 for prospective customers. When the interface works 24/7, there can be issues with tech glitches. There should be a dedicated team that looks into tech glitches round the clock.
Easy To Customise
A lot of LOS providers have sold the same product to many lenders. The product that a lender buys should be a white plate interface that can be customised with lenders’ workflow specifications. It should also be flexible to be upgraded without overhauling the entire system.
All lenders don’t have the same pre-qualifications for loan applications. Some may have more checks than others. Subsequently, the workflow in the stages of the loan cycle may differ from one lender to another. A LOS can never be a one-size shoe that fits all. It has to be customised as per the lender’s workflow requirements, stand out in the competition, accommodate future requirements that can be easily embedded into the existing system and be easy to operate delivering accurate results.
A bank after considering the features has to choose a software that is objectively highlighting the essential features. Nonetheless, such software also has to be scalable and advantageous cost-wise for the banking and lending institutions.