On November 10, 1942, following the victory against the Germans at El Alamein in North Africa, the famed British prime minister Winston Churchill famously said: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Later, in his memoirs, Churchill depicted this battle as a turning point in WWII. The same, albeit in a very different context, can be said of the state of digital lending now.Digital Lending: Key FindingsThe lending landscape is experiencing a remarkable transformation, with digitalization providing the potential to streamline operations, enhance the customer experience, and unlock growth opportunities. Here are some of the main findings of the Digital Banking Report 2024 on the state of digital lending.
- Large gap between digital application processes for consumers and small businesses. Around 90% of financial institutions (FIs) allow loan applications online, while 65% of FIs offer loan applications via mobile. However, only 17% of FIs allow fully online processes for small business loans, with FIs allowing fully mobile processes for these loans dropping to just 6%.
- Over half of FIs offer an end-to-end digital process. Of the FIs offering digital credit, 57% allow the process to be completed without a visit to a branch. Most FIs that aren’t fully digital plan to be in the next three years.
- Branch visits are still required for a significant number of applications. For FIs who do not offer an end-to-end digital process, a visit to the branch is necessary for signatures (43%), documentation (43%), and ID verification (33%).
- The majority of applications can be completed in under ten minutes. Half of respondents claimed their process takes under five minutes, a substantial improvement from 20% in 2020; 31% take 5-10 minutes, and 19% over 10 minutes.
- Restarting an interrupted application is now easier. Over half of the FIs surveyed (57%) now offer the ability to resume an application that has been abandoned. However, too many people are still required to restart the process after a pause.
How Your Institution Can Improve Digital LendingThese numbers show that FIs have made considerable progress in all components of their digital loan offering. However, there is still much that can be done to truly maximize the opportunities provided by digital lending, such as enhancing the customer experience, optimizing operational efficiency, and boosting security and compliance. We explore some key themes that can take your community financial institution’s digital lending to the next level.
- Focus on the customer experience. Make sure that your loan application process is designed around your customers’ needs. It should be simple, quick, and intuitive to use. It should also ideally be available seamlessly across all channels so that customers can pick up where they left off on the device of their choice. You can leverage data and analytics to personalize your offer and provide educational resources and virtual support to ensure customers are guided through the process if they need help.
- Make the most of advanced technology. New technologies can give an institution a competitive edge. A modular approach, where new components are integrated seamlessly into the core, provides the greatest flexibility to adapt to a changing environment. Blockchain technology can be used to develop smart contracts, artificial intelligence (AI), and machine learning (ML). Blockchain can also help assess creditworthiness and detect fraud. Robotic process automation (RPA) can speed up the lending process by automating repetitive and rule-based tasks.
- Adopt a mobile-first approach. According to Morning Consult, just under half (48%) of US consumers prefer mobile apps, while 23% prefer to bank online and 9% in a branch. With smartphones being the channel of choice, particularly for younger customers, community financial institutions should ensure they have a user-friendly mobile loan application process that allows customers to apply for, monitor, and manage their loans from anywhere.
- Expand the digital ecosystem. Embracing open banking application program interfaces (APIs) could allow your institution to extend its reach in many ways: by leveraging fintech partnerships and their innovative technologies; by accessing customer data from outside the institution to give a better understanding of their needs; and by embedding your lending services in other platforms, giving you access to a broader customer base.
- Leverage feedback and insights for continuous improvement. Collecting customer feedback through surveys and other channels will help you to identify pain points in the lending process. By systematically collecting and analyzing this information, you can uncover friction within your process that may otherwise go unnoticed. Integrating AI into your operations amplifies this effort, offering predictive analytics and detailed assessments of your data. This enables you to proactively refine your processes, enhancing efficiency and customer satisfaction, and ultimately driving sustainable growth in a competitive market.
To thrive in this evolving digital landscape, it is essential that community financial institutions adopt a truly customer-centric approach to lending, by offering a user-friendly, simple, speedy, and personalized experience across multiple channels. In order to do this, they will need to focus on their mobile offering, leverage modern technologies, expand the digital ecosystem, and foster a culture of continuous improvement.
