$30 billion industry; it is the next major income growth opportunity for financial institutions.
In this article, discover why digital lending is projected for such growth, and how it benefits both lenders and borrowers.
What is Digital Lending?
Applying for small-business or personal loans can be a time-consuming process for both the applicant and the issuing lender. This is especially true for small businesses, which often need quick access to cash to fuel growth. One of the greatest inhibitions for these borrowers is not their credit worthiness but lost time. In today’s society, a physical trip to any financial institution is a luxury few can afford, especially when it comes to securing a loan: consumers wait to speak with a lending employee, complete the in-person paperwork and then wait for the loan to go through underwriting; it’s easy to see why something had to give.
Digital lending solutions take this arduous process, which could otherwise last days or even weeks, and condenses it into an almost instant digital event. During that short process, the applicant simply answers standard loan questions on their mobile device or desktop, e-signs the necessary documents and quickly receives notification of the amount they are able to borrow. This brings the convenience and speed of digital technology to the lending process.
Automation Saves Time and Money
An automated lending process might initially be construed as a complicated burden on your institution, but in reality, it provides far greater operational efficiencies than the manual alternative.
A quality digital lending solution gives the applicant an estimate of how much they qualify for immediately upon completion and the completed loan is usually processed within hours, granting the borrower quicker access to cash.
The underwriting process also is automated, saving the lender countless man hours. In the past, many community banks and smaller lenders were forced to stop issuing small loans altogether due to inflated underwriting costs; those small-business lending ventures simply did not yield enough profit to justify the loan.
With the aid of digital lending, however, these underwriting costs are reduced, allowing community institutions to again tap into this otherwise unattainable market and reap the benefits therein.
But What about Compliance?
From a compliance standpoint, digital lending solutions allow regulatory documentation to be stored in an easily accessible format. This, too, is beneficial from an operational standpoint because it alleviates the need for a manual search of documentation by employees, which can be a time-consuming affair. It also reduces the risk of human error when searching and storing compliance documentation.
Digital lending platforms also provide a transparent (and completely digital) audit trail for regulators. This is an enormous value due to the sudden and urgent need for this documentation when regulators require it.
Not Just Pie in the Sky
Digital lending marks the future, for both financial institutions and consumers alike; rarely do the needs of bank and consumer harmonize in such a meaningful way. For many community banks, this technology might appear unattainable—a pie-in-the-sky fantasy. However, by partnering with a digital banking solutions vendor, digital lending is accessible and affordable, bringing this growth opportunity to financial institutions of all sizes.