As lenders continue to digitize the lending process, they are beginning to enjoy a number of powerful benefits, including better decisions, improved customer experience, and significant cost savings. But as McKinsey Partner Gerald Chappell has pointed out, “It is also a complex and challenging project.”
But that doesn’t mean it can’t be managed effectively. Lenders moving down the path to digital have been most successful when they keep 5 key points in mind as they planned their journey.
- Do the right things in the right way
This is foundational and critical to any new initiative, but it is often taken for granted when it comes to the digital transformation. Lenders sometimes assume that all we’re really talking about is saving the important loan documents in a new electronic format. Digital lending is about much more than the documents that end up on the closing table. It’s really about how all of that information got there in the first place, and being proactive in keeping the applicant apprised of where they are in the process.
- Rapid scoring and analysis
Speed is an important part of user experience. Consumers have been able to get near instant decisions for credit card applications online for 20 years so there is an expectation for speed. Also, lengthy applications have high abandonment rates. To expedite the process, you must include as much automation as possible. Having your digital team working with your underwriters to better understand decisioning criteria is a critical element to automating them.
- Business requirement definition
One of the most common reasons new initiatives fail is because the business requirements have not been adequately defined in advance. In the case of lending, management understands the compliance requirements for the finished product, the borrower’s requirements for the experience and their investor requirements for acceptance of the asset. What is often overlooked are the many requirements that govern how the lender works with settlement services partners to maintain a fully digital process. An objective view into the process can be helpful during this phase of the journey to digital.
- Smaller more frequent releases
This is a core principle of agile software development. When it comes to the digital transformation, lenders have the luxury of taking the origination process digital in steps and can therefore take smaller bites into the problem more frequently. To make all of these factors easier for lenders to consider, it helps for them to have a general tolerance for experimentation.
With the right partner, the lender can be more tolerant of experimenting with an iterative process in the knowledge that their enterprise will not be exposed to risk while it moves into the realm of digital lending. And that’s a destination that every lender will have to reach in the near future. Those that reach the digital process soonest will reap the most benefit.