Is Technology Sprawl Ruining Your Member Lending Experience? (Part 1 of 2)
How many systems, both digital and manual, do your members and employees have to navigate before booking a loan? The answer may surprise you, and provide some critical insight if your credit union isnít meeting its loan growth goals.
What is Technology Sprawl?
Tech sprawl isnít just a lending problem or even a financial services problem. Everyone who works in an office, regardless of industry, often has several web browser tabs and software programs open at once and must toggle back and forth between them to do their jobs. And, what about your smartphone? During the course of a day you might use as many as 20 different apps to perform a large variety of tasks, from checking your email, texting colleagues, checking the weather, shopping on Amazon, and paying for your latte, to finding directions to your lunch meeting, checking the news, verifying your account balance, posting something witty on social media, and maybe even making a phone call.
Yes, technology has expanded our ability to do more things with greater ease, but has it really made us more efficient? According to the U.S. Department of Commerce, our nationís gains in gross domestic product are increasing at the same rate as average hours worked; in other words, we arenít gaining any efficiencies. And this isnít just a recent development; since 2011, the U.S. has only averaged 0.4% annual growth in output per hour of work, the lowest measure since the late 1970s and early 80s, and far below the 2.3% average weíve enjoyed since the 1950s.
When looking specifically at lenders, not all are inefficient. Some have implemented a robust loan origination system (LOS) that serves as a central hub, and provides smooth integration with the lenderís core system, as well as with all the various third-party providers required to quickly and effortlessly move borrowers from application to funding. Todayís consumer expects the lending process to be fast and easy, and numerous studies have shown consumers value convenience over price or loan provider.
4 Ways to Fight Lending Technology Sprawl
Although many credit unions with $100 million in assets or more utilize efficient loan origination systems; surprisingly, many do not. If your credit union is considering the move to an LOS (or needs to replace or upgrade its existing system), here are some important questions to address as you begin your search.
1. How efficiently does the LOS connect with your core system and other systems?
All software providers claim they integrate well with other tech vendors, but itís important to do your due diligence and confirm those claims. Your LOS must not only connect with other systems, it must do so completely and efficiently.
For example, your credit union might have separate software to collect loan applications on different channels, with one for your call center and branches, another for your indirect lender, and yet another for online and mobile applications.
You probably use one system for pre-approvals, and several more for loan decisions, disclosures and funding. There are also systems that quantify CECL requirements, while others handle internal reporting. And thatís just direct lending. If you manage an indirect lending program, you also have to integrate with dealer systems.
2. Does the LOS support an enriched member experience?
Integration speed is important here, but an LOS must also provide seamless connection to all the steps involved in the loan approval process, from pre-approvals to funding. The only time you should ever ask your members to submit additional information or use a different channelósuch as calling a member service representative or visiting a branchóis if there is a problem. This includes the new member process for indirect or direct borrowers that are in your field of membership, but arenít yet members.
The LOS must provide your credit union the ability to quickly and easily complete the new member application process, which may include separate systems to verify and authenticate identity, run ChexSystems, comply with Bank Secrecy Act/Anti-Money Laundering regulations and provide Truth in Savings disclosures.
3. Does the LOS enrich operations?
What is often overlooked in the search for an LOS is the value it should bring to your staff. Your credit unionís origination system might, in fact, integrate with your other systems, but if that integration requires employees to toggle among several screens and input data manually, they will likely find it very difficult to embrace. And, if your LOS results in additional calls for your call center or branches, the senior managers in charge of those divisions may not be on board with it, either. The system isnít just about the member experience it provides; your internal team must also benefit from it.
4. Does the LOS help your credit union grow members and loans?
Member experience and integration with your dealer network are essential. However, you should also make sure your LOS has the ability to leverage your existing data into growth. Which members are ready for additional loans? Which members are likely to be entering a new life stage, and with it, have different lending needs? And, does your LOS pull performance data and use it to improve your underwriting and pricing?
The account origination feature of our Lending 360 LOS reduces tech sprawl by offering a member-friendly solution to open and fund new accounts. Integration between account origination and Lending 360ís loan origination functions enables credit unions to smoothly process loan applications. This feature supports new member growth, marketing and cross-selling efforts by providing the ability to open deposit accounts across all digital channels.
Itís important to remember that a strong loan portfolio isnít built upon a shotgun approach; access to data, and leveraging that data, allows you to tailor your new loans to fit your specific growth and income goals.
In part 2 of this article, weíll discuss the keys to implementing the right loan origination system to ensure that your performance and ROI expectations are met.