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The New Rules of Digital Loan Origination: Fast, Easy and Scalable


By: Karen Oakland, VP of Financial Services Marketing at Smart Communications

Loan origination is a competitive battleground, where only the swift and digitally strong survive. From auto, home and student loans to business financing, lenders have worked for years to automate and optimize as many aspects of origination as possible on the journey to the “straight through processing” promised land. And while much progress has been made for consumer loans, the pandemic has put a harsh spotlight on places where paper or manual processes still remain. Add to that the need for banks to quickly support special government loan programs like the U.S. Paycheck Protection Program (PPP), or U.K. Recovery Loan Scheme, and the digital gaps became even clearer.

Digital Gaps Cause Challenges for Complex Loans

To be sure, the complexity and custom nature of business loans makes them more challenging than consumer loans to digitize. Like investment advisors, commercial loan officers often build client relationships that last decades. When it comes to financing multifaceted business deals, customers often want the high-touch reassurance that their loan is being personally handled by a trusted advisor.

So how do lenders maintain these relationships now in a digital-first world?  And how do they take advantage of digital innovations, so advisors can spend less time on paperwork, and the business can scale to manage a higher volume of loans?

In a recent article on why commercial banks struggle to digitize account opening, the author cites a telling statistic: “[56%] of commercial banking executives say digital account opening is the No. 1 technology issue for business customers over the next five years, according to a recent study by Phoenix-based Catalyst Consulting Group.” To overcome these challenges, leading lenders have uncovered ways to digitize the creation of complex loan agreements and streamline e-signature from multiple parties. These digital upgrades have made the difference between growth and stagnation in a volatile macroeconomic environment.

The New Rules of Digital Loan Origination

Today, lending is all about being fast, easy and scalable to manage changing market conditions. If your digital lending operations follow these rules, you’ll have all you need to win. Easier said than done, right? Let’s break each rule down a bit further.

  • Fast: Before the pandemic, it was acceptable that lending of all kinds took a certain amount of time. Now, the expectations are that all loan types are processed at lightning speed. Lenders who get this are handily beating those who do not. Shifting digital loan origination is the path to victory here.
  • Easy: Going hand-in-hand with speed is simplicity. People no longer have the patience for complex, paper applications or in-person signing sessions. They know that there are easier ways to get things done now – putting the pressure on lenders to align with those new expectations, regardless of loan type and complexity.
  • Scalable: It’s not great processing one loan manually, rekeying information and mailing signed copies back and forth. But doing it hundreds or thousands of times threatens to overwhelm operations and grind everything to a halt. By automating as much of the digital lending journey as possible, lenders can free up internal resources while providing much better customer experiences. 

RELATED READING | Discover 6 Ways to Change the Conversation in Lending to improve borrower engagement and decrease risk.

A Digital Lending Masterclass: The Bancorp 

One great example of a leader in this space is The Bancorp, a specialized lender and asset manager. Jeffrey Hazelwood, Managing Director of Institutional Banking, believed that reimagining loan origination was a critical part of creating a differentiated client experience. Hazelwood recently explained why they chose Smart Communications to help them do just that, leveraging SmartIQTM and our partnership with DocuSign to support an entirely new digital loan documentation system. At every level, the business focused on creating a solution that was fast, easy and scalable — and the results are pretty incredible.

The company now has around 100 documentary artifacts that can be arranged in up to 350 combinations, to assemble personalized loan document packages automatically in minutes. And because it’s all done digitally, that means no more series of in-person meetings to physically sign multiple packages of documents. Loan parties can review and digitally sign in just a few minutes in one meeting. This also means no more waiting for documents to travel through the mail – they’re available to everyone instantly.

This new solution is fast – really fast. It only takes clients 5 to 7 minutes to complete the application. And that includes identity verification through documentation upload and e-signing. Not only has this resulted in great speed for The Bancorp, but also much greater accuracy: Not In Good Order (NIGO) error rates have dropped to almost zero.

Improved operations? Check. Improved customer experience? Check. But how do these great things translate into business results? Well, nothing short of amazing. As a result of their improved digital loan origination processes, for this business line, The Bancorp is ahead of plans to double market share, quadruple assets and revenue and increase profit tenfold.

Want to learn more about how The Bancorp achieved this wild success through a partnership with Smart Communications? Watch the video below featuring Jeff Hazelwood, Managing Director of Institutional Banking Solution Manager at The Bancorp.