The lending landscape stands at the crossroads of tradition and innovation. As the VP of Engineering at Mambu, I've been immersed in the transformative journey of modernising lending practices. In collaboration with Microsoft, we have explored the changing dynamics of this space in our lending report, and the pivotal role of technology in reshaping lending.

Here, I explore the nuances of this evolution and surface some of the opportunities that lie ahead.

The lending landscape: the rise of ‘finance everywhere’

In recent years, the lending landscape has undergone a profound transformation, propelled by digitisation and enabled by new technologies.

New products such as Buy Now, Pay Later are changing how and where lending decisions can occur, new entrants utilising modern tech to deliver better customer experiences and faster decisions, and, as a result, rapidly-shifting customer expectations. The competitive pressures have never been greater. 

Today's borrowers seek more than just financial assistance; they crave seamless experiences, personalised offerings, and swift access to funds. As traditional lenders grapple with these shifting tides, fintech disruptors are seizing the opportunity to redefine the lending experience. Lenders are unlocking new possibilities and launching innovative, customer-centric offerings with greater ease – to meet shifting customer expectations.

Automation can transform how lending is done: by streamlining processes and hand-offs between teams, reducing manual processing of documents and data, and assisting with decision-making. Those that can embrace these capabilities will have a lower cost-to-serve, and greater customer satisfaction.

It’s time to modernise

From revamping legacy systems, embracing cloud technologies, or leveraging data analytics-modernisation is the cornerstone of survival in a competitive landscape. The approaches to lending need to change in order to meet the needs of customers.

Recent estimates show the market for small business financing is reaching record levels post-Covid. At the same time, dated technology stacks are holding lenders back. Research from Deloitte shows how up to 40% of lending resources’ time is being used up on non-essential tasks due to legacy systems. Seizing their potential requires new ways of operating for lenders.

Similarly, with global demand for mortgages in decline, financial institutions need to double-down on the experience offered throughout the      mortgage process. If not, they risk falling behind specialist lenders or nimble fintechs and neo-lenders that can easily customise offerings based on evolving customer needs.

The path to transformation: Greenfield, speedboat, legacy

Embarking on a journey of digital transformation requires careful consideration of the pathway ahead. Some lenders may opt for a Greenfield approach, starting afresh with a new core, front-end processes, and business capabilities – providing a clean slate and leveraging cutting-edge technologies from the outset.

Others may choose the nimble Speedboat strategy, piloting innovations within specific segments or products before scaling across the organisation. Meanwhile, those entrenched in legacy systems must navigate the complexities of modernisation, balancing continuity with innovation to drive meaningful change through migration or replacement of technology and business operations.

Of course, this is a simplification of approaches, especially for legacy institutions with well-established processes, and for each of these opportunities there are challenges. Transformation of this nature is tough regardless of the institution; however, there is no limit as to what can be achieved. We have seen fantastic examples of where traditional lenders have been able to tap into new technologies in a variety of ways to help move projects along and better serve their key stakeholders: their customers.

One example is the success of New10, a digital lending spinoff by the Dutch banking giant, ABN AMRO. There, the team focused all efforts on customer-facing value creation and opted for a composable approach by using Mambu as their core engine and building out their architecture on our API-first platform. The result was the deployment of a modern user experience, fast onboarding and a 15-minute credit decision. Within six months, the bank secured more than 2,000 accounts and had an NPS score of 60+, defying industry benchmarks.

The power of the cloud in building your core architecture

At the heart of such lending modernisation lies the acceptance of building your core architecture in the cloud. Cloud-native technology offers unparalleled agility, scalability, and security, empowering lenders to streamline operations and enhance customer experiences. From automating workflows to reducing IT costs and bolstering data security, the benefits of cloud adoption are manifold. Cloud-based solutions can also make adopting new technologies to adapt to shifting market trends simpler.

Moreover, tapping into the power of artificial intelligence (AI) augments these capabilities, enabling lenders to make data-driven decisions and unlock new insights across the loan lifecycle.

AI’s vast power is already evident, tackling many of the human-intensive customer service tasks that exist within financial services. As I mentioned earlier, the technology can be deployed at various stages of the lending cycle by drawing on the latest best-of-breed software-as-a-service (SaaS) technologies.

AI has provided opportunities for us to reimagine our approach to operations – whether that’s internal productivity through the roll-out of tools such as Microsoft CoPilot or how we can transform a workflow through automation. Across the entire cycle – from loan application to credit analysis, portfolio management and even account closures: we need to reimagine our approaches because if others are doing so, we’ll be left behind.

Building the future with the right team and enterprise-focused marketplaces

With both an unsettled economic situation globally and society still reeling from the disruptive effects of the pandemic, it is becoming increasingly difficult for lenders to respond to their customers’ needs quickly and with the level of personalisation now expected of today’s digital landscape.

As lenders embark on their modernisation journey, building the right team and leveraging the power of cloud technologies is paramount. At the heart of this journey is the acknowledgement that the opportunity here is not as a cost-cutting exercise, instead, it’s about the customer experience.

Recruiting talent with expertise in cloud technologies, data analytics, and AI is essential for driving innovation and navigating digital transformation. Additionally, leveraging enterprise-focused marketplaces, such as Microsoft, enables lenders to access a diverse ecosystem of solutions and services where security and privacy are guaranteed.

In conclusion, the future of lending belongs to those who dare to innovate, adapt, and embrace technology – and with the right solutions and team alongside you at the time of transformation.

By modernising operations and leveraging the power of the cloud, lenders can not only meet but exceed customer expectations, drive growth, and succeed in an ever-evolving industry. As we stand on the cusp of a new era in finance, let us seize the opportunities that lie ahead and chart a course towards a future where lending is not just a transaction but a seamless, personalised experience for all.

To help you delve deeper into the changing landscape of lending and discover actionable insights for your organisation, in partnership with Microsoft, you can download our free report to access further insights into the opportunities of the digital era.