A Digital Lending Platform: 3 Markers You Should Have it on Board

In 2019, the value of the global market of digital lending platforms (DLP) was estimated at $5.58 billion. According to Allied Market Research, it is expected to grow at a CAGR of 16.7% in 2020-2027, and reach a value of over $20 billion.

The figures above clearly show that many financial institutions find it beneficial to adopt a digital lending platform for their armories. In this article, we will try to find out three main reasons why and when you need a digital lending platform. 

DLP is the end-to-end Loan Origination Automation Coupled with Customer Satisfaction

A DLP gives banks, credit unions, and other financial institutions a perfect opportunity to create a superior consumer experience and smooth customer journey for borrowers, providing them with timely access to a variety of product offerings.

A digital lending platform is a perfect opportunity for remote lending which is a time-saver and a game-changer, especially during the coronavirus pandemic. DLP reduces the time for loan processing due to digital verification and risk assessment from weeks to minutes. And the funds are disbursed to clients in 24 hours or less.

A Greenwich Associates survey made in October 2020 shows that about 16% of SMEs switched banks over the prior 12 months, which exceeds the industry’s historic average of 10-11%. It happened because many business owners were not impressed by their lenders’ ability to get them funding timely.

Moreover, the generation of millennials (and next generations) are going to become a bigger part of your customer base. And their expectations for the efficiency of digitized interactions with businesses will be even higher than that of older generations.

The features mentioned above make it clear that DLPs have significant advantages over legacy processes. And the digital loan management trend is and will be growing around the world annually. Now, let’s look at three ways to know your bank needs a digital lending platform.

1. Your customers aren’t satisfied with their lending experience

But how do I know if my customers aren't satisfied enough, you can ask.

There are several ways to find it out:

• to do market research;

• to listen to day-to-day feedback from your employees for focusing on recurring complaints;

• to set up a team that can do some secret shopping of your lending process;

• to conduct an end-to-end process review with the various teams responsible for each step in the loan origination workflow.

2. Your financial institution struggles when lending conditions change

The only constant thing in the economy is changes. That is true for the lending industry as well. The events during the COVID-19 pandemic are a perfect illustration of what can happen when the changes are unexpected and devastating.

Again, you can ask, how do I know if my lending company or bank is ill-equipped for changing conditions?

It's as simple as that:

• Compare your company to your competitors. How long does it take your financial institution to start approving the new types of loans, when a change to a loan program is announced? Are your competitors faster or slower?

• Find out if your company has an effective software background. Are your systems overloaded if there is a sudden increase in demand?

• Figure out the level of lending process automation. Is your lending software able to take repetitive tasks off your staff’s plate well enough? How many potential customers were sent away to your competitors?

3. Risk management capabilities are lacking at your financial institution

It’s hard to assess the risk profile of your individual borrowers as well as factors in market/crisis risk. To do that, it’s necessary to take a systemwide approach that monitors your entire portfolio and models a number of market scenarios. If your company has no sufficient staff for that and frequently fails to mitigate the risks, it's time for you to turn to DLP.

1. A digital lending platform, on the other hand, can give you real-time assessments of your risk profile by constantly monitoring your customer data and pointing out threats before they materialize. 

2. DLP improves the ability to maintain effective compliance management, providing your regulatory oversight team with visibility into the way that lending programs are being administered.