Top 5 benefits of lending-as-a-service

Lending-as-a-service (LaaS) is an emerging trend in banking and financial services that is seeing lenders turn to the latest technology in order to boost their service offering.

The growth of LaaS is fuelled by open platforms that enable financial institutions to build, launch and operate better products for their customers. The impact of cutting-edge technology on the financial services industry will only continue to increase, and the onset of Open Banking has prompted the swift separation of service distribution from production. Lenders who do not adapt quickly risk being left behind.

Banks such as Santander and RBS are keen to embrace this digital lending revolution to improve their customer journey. They want outdated legacy systems to be swept away, replaced by the innovative, cloud-based managed services that LaaS vendors specialise in.

There is a wide range of LaaS vendors providing complete white label offerings or modules that meet a client’s particular need. Many are considered ‘end-to-end’, due to the proliferation of support services they provide to their clients. This includes onboarding, risk management, automated decisioning, and account management with personalised customer communications. They are also harnessing the latest developments in biometrics and artificial intelligence, specifically machine learning, to bolster speed and effciency. Below are what we believe are the top 5 benefits of LaaS.

Top 5 benefits of LaaS

1. Lower cost of acquisition. With no branches, no salespeople and limited fixed asset servicing costs, LaaS helps to contribute to boosting profitability for banks and other financial institutions.
2. The right decision at the right speed. The ability to perform straight-through-processing and make decisions very quickly (even if they require multiple approvals) means that borrowers can access funds when they need them, adding much-needed working capital and liquidity to their businesses.
3. Objective decisions. LaaS has prompted significant reductions in decisions that are based on a ‘maybe’ or ‘gut feeling’ of an underwriter: algorithms in most non-edge cases outperform underwriters.
4. Better allocation. Underwriters of course will still have a part to play in the process, but they can be better allocated to those tasks that genuinely require their skills.
5. Improved customer experience. LaaS providers leverage the latest user interface (UI) trends, including responsive design, minimal clicks and an intuitive user journey.

Roots in lending

A number of vendors were initially lenders themselves, so they are able to bring in additional expertise and knowledge alongside the new technology. This has resulted in burgeoning partnerships, where the LaaS vendor helps guide the client through the cultural and business challenges associated with the complex process of digital transformation.

Through these market-leading solutions, banks and financial institutions can begin to improve their entire lending infrastructure, enabling improved customer experience, faster lending, automation, reduced cost per loan, and increased profitability.