7 Strategies for Achieving Balanced Loan Growth – Part 6

Onboarding & Minimizing Friction: How to Get Customers In and Then Stick.

Online lenders are improving the loan application experience to meet customer expectations for convenience and speed after tech giants like Amazon and Netflix have disrupted every single industry in terms of the customer experience.

To keep their share of the market, banks and credit unions must take steps to modernize their existing approaches to lending. As more and more consumers seek funding from online lenders that is fast, seamless, and paperless, this becomes even more critical. The online application process should typically take less than 30 minutes and would ideally be as fast as five. With basic credit requests, some funds can be disbursed within 24 hours and systems have been designed to routinely fund approved loans within just a few days.

Comparatively, when consumers apply for loans at traditional banks, they cite frustrations with the “difficult application process” and “long wait for a credit decision,” according to the Federal Reserve. On average, it takes a small business owner upwards of 25 hours to complete paperwork before obtaining funds, resulting in a loss of revenue due to time spend on the application process.

This poses a serious challenge for a financial institution’s profit margins and creates a negative customer experience. More often, financial institutions process a small business loan of $100,000 the same way they process a $1,000,000 commercial loan, which drives institutions to prioritize high-dollar commercial loans with greater profit margins.

Fortunately, financial institutions can reduce the transaction costs for small business loans to boost profit margins and ultimately provide more funding to small businesses by modernizing the lending process and leveraging technology. Some banks and credit unions have digitized part of the process, however there are still portions of the application that require mailing physical documents or a visit to branches. Additionally, some institutions only offer a digital option for certain loans categories, like mortgages, personal loans and auto, according to the American Bankers Association.

An overwhelming majority (96 percent) that offer digital loans have only digitized the application process. Financial institutions must also digitize document uploads, support e-signatures, and facilitate direct communication to customer service through digital channels like a customer relationship management system. Replicating a paper-driven loan application process online does little to improve the customer experience, making it almost an obsolete change.

To offer the level of convenience today’s consumers demand, financial institutions must go beyond converting paper into a digital document and instead, digitize back-end processes, including minimizing data entry by providing pre-fill functionality within the online loan application and making obtaining loan status updates easy through a customer portal.

These initiatives will require effort, but advancements in current technology means that delivering a streamlined and more transparent experience is possible for institutions of all sizes. With the Baker Hill NextGen® Client Portal, the customer experience is improved by simplifying routine tasks and enhancing communications between you and the borrower during the loan application process, allowing bankers to provide dialogue and guidance. 

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If you need to catch up on parts 1 through 5, you can click the links below:

Part 5: CECL as a Strategic Business Initiative

Parts 3 and 4: Deal Pricing and Efficient Loan Origination

Part 2: Efficiencies Needed within Accounting, Tax Returns & Financial Statement Processing

Part 1: CRM Systems Are Critical for Understanding Your Customers

You can also download the full eBook to find out all seven strategies today.

Author Bio

Baker Hill empowers progressive financial institutions to increase revenue, reduce risk, and drive more profitable relationships.

Streamline business, consumer direct and indirect lending with our common origination platform. Understand profitability and risk at every level with our sophisticated business intelligence and analytics. Monitor and maintain a healthy financial portfolio with our statement analysis, exception, and risk management solutions.

Explore our solutions below for more information on how to generate sustainable growth, minimize risk and increase profitability.