Reducing friction in lending and accelerating loan approvals with digital data collection
Customers have come to expect quick and efficient services across industries, including financial services. With the rise of instant gratification and the seamless experiences provided by technology, borrowers now anticipate faster loan approvals and risk assessments than ever before. They seek a streamlined process that minimizes paperwork, reduces waiting times, and offers swift access to funds—and often aren’t willing to settle for less.
In parallel, competition within the lending industry has intensified, with a growing number of players vying for borrowers. Competitors include new players like peer-to-peer lending and online lenders, who have disrupted the lending landscape by offering faster loan approvals and risk assessments than traditional banks and lending institutions. In fact, the global alternative lending platform market size is expected to reach $8.2 billion by 2028, rising at a market growth of 22.0% CAGR between 2022 and 2028. As borrowers become more familiar with these alternatives, they expect similar efficiency and speed from traditional lenders and are willing to look at other options if they aren’t satisfied.
The drawbacks of the traditional lending process
The conventional financial lending process involves several steps, including loan application, risk assessment, approval, and disbursal. It relies heavily on manual procedures like gathering financial data from borrowers such as financial statements and credit reports, as well as tedious paperwork and manual data entry. Not only is it labor-intensive for loan officers and other lending institution employees, but like any manual process, it’s also susceptible to errors and inconsistencies.
In addition, the manual review and analysis of extensive documentation takes time, significantly slowing down the loan approval process and impacting the borrower's ability to obtain timely funding. In fact, a traditional commercial loan application takes an average of 45 days to 3 months to complete, which is often time that small businesses simply can’t afford.
Furthermore, not everyone has access to traditional lending institutions, or the capacity to conduct their processes—for example, potential borrowers in remote locations or in the global south. This limitation closes off markets that have the potential to be extremely lucrative for lenders.
Digital transformation and the adoption of advanced technologies have paved the way for more efficient and streamlined lending processes, making loans accessible to more people and opening new markets. They enable the automated collection of financial data directly from various sources, such as bank statements, tax records, and credit reports, and outsource other elements to the borrower. They also eliminate the need for manual data entry, reducing errors and saving valuable time and resources.
Digital data collection: a gamechanger for the lending industry
Digital data intake, in particular, has revolutionized the lending industry. Digital data intake isn’t just a way to eliminate manual data entry—it’s a new way of working with customers that utilizes a user-friendly UI and leverages digital technologies like autofill, dynamic forms, and e-signatures to collect customer information.
Unlike traditional data collection methods such as paper forms or online PDFs, digital data intake journeys dynamically adjust to customer input, displaying only necessary fields and pre-populating fields with customer information. This eliminates the need to provide the same information repeatedly, in every interaction with the lender. It also saves time and fosters a sense of personalization, which can be very important to customers and enhance customer satisfaction.
Furthermore, with digital data intake, all data is validated in real time, preventing customers from submitting forms and requests with errors, a problem that leads to delays in the loan approval process while loan officers track down the customers so that they can correct the form. It also ensures that lenders receive accurate information for their risk assessment.
Overall, the digitization of document verification, electronic signatures, and online communication expedites the loan approval process, streamlining workflows and enabling faster collaboration between borrowers, lenders, and other stakeholders. In addition, robust cybersecurity measures embedded into digital data collection platforms protect sensitive borrower data from unauthorized access or breaches, ensuring compliance with increasingly stringent global data privacy regulations.
The benefits don’t end there. With digital data collection, all data is standardized, allowing lender institutions to leverage powerful analytics and machine learning algorithms to analyze borrower data quickly and accurately. Digital data intake journeys can also help lenders gain a complete view of their customers by showing a unified picture of customer data from multiple sources, both within the bank and from other publicly available information. This enables more precise risk assessments and faster decision-making. Last but not least, with digital data collection, banks can create a customer dashboard that gives both lenders and borrowers visibility into the status of their loan applications in real time, a feature that also enhances customer satisfaction.
Lenders successfully leveraging digital data collection
Many lenders are already leveraging digital data collection and achieving impressive results. For example, a leading Israeli bank, Bank Leumi, adopted digital data collection as part of a digital mortgage onboarding initiative. Today, it has developed into a complete end-to-end experience allowing customers to obtain a mortgage with Bank Leumi via a streamlined and unique digital customer journey.
The results are groundbreaking—the self-service request process reduced mortgage approval time from 14 days to just 48 hours, achieving a competitive advantage of 12 days. And the market has taken note. Bank Leumi has seen an increase of more than 500% in the number of mortgages sold since they digitized the system. Following the success of the mortgage program, the bank has now implemented the same type of process for loans, business account opening, and other use cases.
Quicken Loans, a non-bank lender, is another example of how digital data collection is revolutionizing the loan industry. Quicken Loans disrupted the mortgage market with Rocket Mortgage, a groundbreaking digital product that allows customers to submit their mortgage requests entirely online. Customers can provide information about their finances and the type and amount of the loan that they’re trying to obtain on a user-friendly website or app, and the company accesses supporting documentation such as pay stubs and bank statements directly from financial institutions, ensuring accuracy and saving the customers the hassle of scanning and uploading the documents. Like with Bank Leumi, the new approach has delivered results. Rocket Mortgage claims it has become the leading mortgage lender in the United States.
It’s time to join the new world of lending
Adopting digital data collection significantly reduces friction in the loan approval and risk assessment processes in the lending industry. By leveraging digital data collection, lending institutions can accelerate loan approvals, enhance risk assessments, minimize errors, and improve customer satisfaction. Embracing these technologies is crucial for lenders to remain competitive in a tight market and meet the evolving expectations of their customers.
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