Written by Andrew MacDowell, Director, DecisivEdge™
Digital transformation, digital revolution, digitization – whatever name you give today’s explosion of technology – the trend has changed commercial lending, like other industries, both in and out of the finance space. While loan origination software has long been a part of the commercial finance landscape, many aspects of the lending process are now digital, which is driving advances in how loans are underwritten.
If you are using an aging platform, you likely are lacking functionality that speeds up loan origination and increases accuracy. Investing in new systems can help brokers and lenders capitalize on efficiencies such as increased automation, integration of digitized data and other innovations that are driving today’s commercial lending success.
Loan Underwriting Means Analyzing Data
Way back before the first loan origination software became available, lenders and brokers manually followed guidelines to calculate debt-to-income ratios, evaluate the maximum loan amount based on property value and a host of other underwriting criteria. Because base lending guidelines became standardized, lenders began developing reasonably similar approaches to creating underwriting workflows.
However, since creating these workflows involves adding steps or layers to a process, inefficiencies creep in, along with the potential for error and delay. For example, if a loan document contains an error, the entire lending process can grind to a halt while a loan assistant researches and corrects the problem. Commercial lending can be quite complex, inviting more opportunities for error.
Leverage Data and Automation for Increased Productivity
Manually underwritten and processed loans are error-prone, but these problems also pervade older software systems aimed at loan origination and underwriting. The best weapon against error is automation and removal or reduction of human error caused by duplicate entry. Today’s full-featured enterprise solutions automate processes to reduce the mistakes and improve customer experience.
The complexity of modern commercial lending means accurate automation is more crucial than ever. Luckily, much of the data relied upon for a lending decision is digitized in one way or another. For example, credit reports can be integrated with lending platforms, making entry of credit information seamless. Other digitized information can involve collateral valuation and due diligence, but digitization is just one aspect of loan origination automation.
Digitization Plus Automation Equals Faster Lending
The right solution automates manual processes, but also incorporates end-to-end capabilities that empower employees to get loans to the decision stage more quickly. This is the goal of most lenders – to create a “straight-through” process that eliminates duplicate work while taking advantage of digitization. By dialing down underwriting turnaround time, the efficiency of the whole process improves.
For example, automated underwriting can minimize delay and drive more business through efficiencies because new systems are highly customizable and configurable. Lenders can customize parameters to also allow for flexible pricing, so a loan file that might not be qualified for one particular product might be able to pass automated underwriting for a different product. This flexibility increases business opportunity.
What should lenders be looking for in an ultimate underwriting tool? In addition to automation and data integration, loan underwriting platforms should incorporate an overall data strategy that ensures that accurate information is part of the process. With increased automation and digitization, efficiencies only pay off when the processed data has integrity. This touches upon regulatory pressures, too, which arose after the financial crisis as a response to the inability of many lenders to quantify risk exposures. Between regulation and normal business practices, it’s crucial for lending platforms to reflect the reality of any given loan package accurately.
Achieving Accuracy and Speed
The complexity and risk of new lending call for automated loan underwriting with broad capabilities. Oracle’s Financial Services Lending and Leasing enterprise software, for example, gives lenders a complete set of tools to automate manual processes and transactions, achieve a “straight-through” process, maintain compliance and enable comprehensive data capture for risk management purposes. Oracle’s solution is also highly customizable, with over 200 configurable parameters at the product level that are flexible and reflect different lending variables. With these benefits, a lending platform becomes more than an origination and underwriting tool; it becomes indispensable to servicing and business operation, as well.
If your business is looking to achieve quick and consistent originations, with an enhanced user experience that drives everything from originating to collections, DecisivEdge can provide more information on how new loan origination platforms outpace legacy systems. Connect with our experts today and learn how to optimize commercial lending.
About the Author:
Andrew MacDowell has over two decades of senior management experience in the credit card industry with Fortune 500 financial institutions such as MBNA Corporation and Bank of America.
Andrew has specific expertise in areas such as Business Development, Loyalty Marketing, Corporate Project Management, Bank Operations, Payments, and Fraud. Most notably, Andrew was a key founding stakeholder of MBNA Canada during its peak growth phase in the Canadian marketplace, which ultimately led to it becoming the largest MasterCard issuing bank in Canada.
Andrew is the product owner of Lending and Leasing as a Service (LLaaS), a DecisivEdge software solution built for small to medium sized lenders.
Andrew is a graduate of Georgian College where he holds a diploma in Business Administration and majored in Marketing Management.