Deliver a Better Customer Experience with a Loan Origination System

Mitch Woods: Thanks for tuning into today's episode of Lending Made Easy. Today we're gonna talk all about customer experience. The top priority for the next five years is customer experience for a lot of businesses and really for a good reason. Not only are buyers more likely to do business after receiving a good personalized experience, but research has also shown that 86% of buyers are willing to actually pay more for a good experience.

So businesses are investing in customer experience to improve the cross-sell and upsell metrics, customer retention, uh, and customer satisfaction. So David, we'll start with you. My question today is, how does a loan origination system help a bank or credit union deliver a better customer experience? And I guess a second part of that question, how do you think that can impact deposit growth for those institutions?.

David Catalano: I mean, I get this question all the time. I think it's a great question. I think it's important. So just to put this into context, a lot of the, a lot of the banks I work with are considered to be community banks, so think 3 billion and under. The majority of their loans that they're gonna originate are what would be considered commercial loans.

So they have spreading and credit memos and all that stuff and tracking items, and so there's a lot of work on the bank's part to complete a loan like that. And it's a complex loan, in my opinion, in my experience, the best way to serve your customers is to empower your employees with the digital workflow so that the employee can originate, underwrite, document, fund that commercial loan in a way that they don't have to reenter information twice.

So at speed it's fast. You take a 75 day process and you get it done in 34. Same process, same people. The way you do that is simply stop entering the same stuff twice. And if you think back in time, in the two thousands and the nineties, all, you know, basically the the time when all the banks got their solutions, they were buying what's considered today a is a point solution.

It did a single thing in the process, but it didn't talk to the next thing that had to be done in the process. So you reenter all the information you need to get to the next step in the process. So if you just eliminate all that and create a digital workflow for your employees, your commercial customers are gonna be like, oh my goodness. I can't, I don't want the money in 35 days. I want it in 45 days. Right? You got the money faster than they actually need it. It's gonna blow their mind.

And then the second thing that's gonna happen in that process is, is you're gonna stop asking them for the same thing twice because you're gonna have a checklist of items and you're gonna be able to see through your loan origination solution into imaging, you're gonna know what's on the core relative to this relationship. And you're gonna know what's in your LOS all from a browser. So you can see all of that. And, you know, should I get these updated financials? Well, I just got them and here they are. So you don't have to ask for something twice. You know what you have.

So the two things that, that I think are important is don't ask for something twice and, and empower your employees to do their work quickly the first time. Bryan, what do you, what do you think? 

Bryan Peckinpaugh: You're spot on. And I, there's absolutely that side of the coin, which is the, the speed, the ease of use is going to cause them to do more with you. But there's also the flip side of the same, which is more so than ever before, and we've seen this growing trend over the last 10 to 15 years, is the rate at which somebody will switch their banking relationship due to bad experience. So it's not just empowering you for growth, it's, it's protecting the leakage out the, the back door of clients that say, man, I can't work with a bank that provides this type of experience, so I'm going to lift my relationship and move it somewhere else.

I was just at a, a conference not too long ago. And, uh, one of the presenters had a slide up that was talking about the shift in deposits over the last, I think it was roughly 15 years, and kind of stratifying that across the, you know, top 50, top 100 banks, the super regionals and then the, the community banks, as you were talking about David and back in the, you know, about 2020, 2010 somewhere in that ballpark. The, the mix was, was much more even across that stratification. And the, the crazy part about that is the, the bottom third. So those community banks, those banks roughly under 3 billion, you know, make up like 95 to 99% of the total banks in the United States, depending on the year.

Again, at that time of, I think it was 2010, they made up roughly 35% of the deposit base in the United States, and as of 2022, they have lost 15% of the deposit share to the banks in the top 50, top 100 and, and I would say a vast majority of that is the overall banking experience. So you're, you're talking about competing with a Chase, a Wells, a US Bank.

Uh, those who have invested heavily in technology across all kinds of automation. Front end borrower automation with online application channels. Backend system automation so that, you know, David, to your point, I can empower the, the customer facing people to do their job better and faster. And what we're seeing is that shift to bringing the deposits into their realm as opposed to the community bank space where, uh, you know, it had historically lived.

Uh, so this becomes more critical now than ever, right? As we think about the value of those community banks, you know, it's your presence in the market. It's your people that live, you know, right next door to the, the customers that they're serving. And they're very familiar with the markets that they're in and, and what's needed by those communities.

But you have to be empowered with the technology to deliver the experience that's gonna allow you to capture that, right? Gone are the days of, you know, just because I know you, you're gonna bank with the bank I work for, I've got to be able to provide the, the experience that people expect, right? I mean, it's the Amazonification if that's a word, that we've experienced, right? Where, uh, I'm able to click a button and have just about anything delivered to my house in two days. Even though I live out in the middle of nowhere and I expect in, in, in a lot of instances, demand a similar experience for my financial wellbeing. And we're seeing, you know, FinTech startups all over the place that are, that are looking to solve for that.

You know, you, you see folks who are tasked with solving that. I'll call it just generic customer onboarding problem. Uh, identifying who's on the other end of the keyboard, are they, who they say they are, and should I do business with them in an automated manner to just ease the, uh, friction out of the process to do business with me as a financial institution.

David Catalano: Interesting. Yeah, I, I understand the consumerfication. That's a word of, of the pro of, of the process or the consumer experience. I, I would argue that the commercial borrower needs the money a lot more than he needs the experience. And if you provide, you know, a fast turnaround as a commercial bank to your commercial customers, you're going to retain them unless you do something really, really bad.

So, That gets back to my speed with the process and pre-flighting deals and getting a fast No, or getting a fast, here's how we could do it. That's gonna allow the commercial borrower to rest in the comfort of knowing he's in a good spot versus the experience you get with a Chase online. You know, for whatever you're, you're whatever you're doing with Chase, I don't know if I was a local developer, I would be pursuing those types of large bank relationships versus the community bank. You know, where I know the people and they know who I am and they respect my relationship and I respect them and we work together well. Um, and there's a relationship there. I, I do think the community bank has that relationship that you can't get at the larger bank, and they've had a great cost of funds.

So I, I do think they have an edge. They just need to make sure they can get those commercial decisions quickly. Now, if you're saying that you're gonna have a very bad, bad consumer experience with the bank, I get it. You can't, you can't be that far off, right? You gotta have some level of parody here on, on what you're talking about, Bryan, I, I get you a hundred percent.

Bryan Peckinpaugh: There's definitely a difference obviously, you know, between the consumer and that commercial bank experience. But, but I do believe, David, we've talked about it on, on prior episodes, and you, you just brought up that speed to Yes speed to No. When we think about this customer experience, we have to consider the RM as, as a customer, right?

It's both an internal and external customer concept, because I, that RM can only deliver the service to those commercial clients that we as a financial institution can deliver to the RM. And if they don't feel like they can get the tools and the the speed to decisions that they believe their customers need, they're gonna look for other opportunities.

Right. And that's, that's where you start to run the real risk of losing the business to the bigger banks is, you know, what is that, that Chase Bank ability to provide a better package to the RM that convinces them to come over with their book of business to, to Chase from the community bank that they're serving and, and a lot of that gets down to do, I feel empowered to do what is right for the clients that I serve. And a lot of that is the big banks are doing deals in 30 days and I'm taking 50. I can't con, you know, I can't continue to compete that way cuz eventually people are gonna, you know, gravitate toward, they're where they know there's that speed. Cuz as you said, when I need the money as a commercial client, I need it.

I'm, I don't want a million dollar working capital loan. I need it because I've gotta, I'm gonna do something about my business that doesn't rely on the processes of the bank. I, I need that to happen, uh, at the speed of my business if I'm gonna continue to, to bank with you. 

Mitch Woods: You know, I think back to before the end of the year, right? The whole meltdown with Southwest. And Southwest is known for really appealing to a certain customer base and providing a good customer experience for the, for their ideal customer, I would say, right? But then they have a meltdown, something that they've known has been coming for a little while, and all of a sudden they're, they're kind of put back on the ropes a little bit.

Right now, their loyal customer base is questioning is that, is this the airline that I want to continue to do business with? And the scary thing is, is, you know, that can be really true for a financial institution as well. So talk a little bit about, with that customer experience, you know, they had technology in place, it was just outdated and on the outside it looked like everything was fine.

So how does that really impact, if you're a banker today thinking about how am I gonna deliver a good customer experience, how does that impact my decisions that are gonna be driving my business forward? Five years from now, 10 years, 30 years down the road. 

Bryan Peckinpaugh: That's a, that's a great analogy, Mitch, and I can't believe it's already last year that, uh, that, that, that happened with Southwest. You know, it's one of those things where, You know, your, your existing systems enable you to provide outstanding customer service until they're not. There doesn't kind of follow a degradation line of customer service where it's like gradually worse. Gradually, a lot of times you're gonna see, you know, a, a fall off due to systemic failure and in the commercial lending space, you know, I've always said that a, a very good RM can hide a bad process. I can still provide, you know, white glove service to the companies that I'm working with, even if my processes and technology are bad until I can't. Right? So until my competition is able to do deals in 30 days, and I'm stuck at 50 until I've got a critical piece of business that I have to get done with one of my largest clients and something in my tech stack breaks and I can't do the deal, or I can't get docs done to close the loan on the day I assigned to close it.

All of a sudden, my entire relationships in jeopardy, you know, and from the RMs perspective, through no fault of my own. And, and that's again where you start to see the potential of losing the talent, losing your real differentiator, which is your people to the bank down the street, because they do offer a modern tech stack.

They do offer speed to closing those types of ideas. That, again, that's all tied back to this experience in general. It's just thinking of your, your internal staff as customers of your experience 

David Catalano: I would agree with what you're saying. You're, you're essentially saying employees need to have the tools to do their job.

And even if it's just a, you know, a, it doesn't have to be a customer facing employee. If, if an employee's unhappy with the tools that they have to complete their work, they could easily leave and find other, other places to work that have the tools that make their job easier, that make it more interesting, uh, that make them more valuable to their employer so it's not just, uh, not just the high, the high dollar employee that you need to be concerned with. I think it's all employees. And as we move through time, more and more of the people you're hiring grew up with a device in their hand and are very used to technology. And if you've got old technology and you're a bank, I know you do. You need to be thinking about that. 

Mitch Woods: Well, too David, not just your employees, but your commercial customers, right? Those people that are, that are coming up, that next wave of entrepreneurs, those next people that are running these larger corporations are in that same boat, right? So they're expecting that same technology experience and, and guess what? Those expectations are changing faster and faster every year, almost every month now. Right?

Even think, thinking of this from my, from my own consumer perspective, if I'm not getting the experience that I, that I expect. It's easy for me to go in and, and, and move an account from one bank to another, right? I can move my deposits pretty quickly. I can house those somewhere else. It's a, it's a different experience for me to go and, and refinance a loan, especially right now when, when rates are, are a lot higher, I'm not gonna want to want to do that. So there is some stickiness there still. But if that experience isn't being met, what does that really mean for deposit runoff or even the potential of of gathering new deposits because the bank down the street doesn't have that technology and isn't providing that experience for their customers. How can I set myself apart as a banker to say, Hey, come do business with me instead. 

Bryan Peckinpaugh: Yeah. I mean, at the end of the day, it's all about think it's delivering on those expectations, right? I mean that's, that's what we're, we're really talking about here at the heart of all of this is the expectations that our clients consumer, commercial, Whatever we, we may be talking about have changed. They, they have elevated their expectations of us as an industry. They are demanding tools. They are demanding speed, they are demanding insight and openness to a certain extent in their financial lives that we've gotta be prepared to deliver to them.

Whether that's through online tools, uh, that, that are self-serve, or through, again, delivering the tools to the financial institution staff that deliver the then experience to the customer. And, and we just have to be cognizant of those shifting expectations and, and really understanding, are we in a position to do that in not just the best of times, but also through redundancy and failure. Right? Like we saw, like in your Southwest example, where they were known for being the customer service airline. They were set up to deliver a fantastic customer experience until they found the, the straw that broke the camel's back, you know, and, and how that brought to light their technology challenges.

Uh, so again, you just don't wanna be caught in that scenario. You wanna make sure you're staying on top of these things and put the right technology in place to, to drive as much redundancy into your business as you possibly can so you're not getting caught off guard and, and having to scramble.

Mitch Woods: Yeah. Some great takeaways. You know, and maybe, maybe we don't focus on the Southwest right. But, but looking at another example that I was just thinking about as you were talking is Netflix. Think about the, the experience change in Netflix from the, the date they started to today. I think I saw an ad not too long ago that said, don't be that red envelope. They started out with literally mailing you a DVD that you had to mail back to them. Now it's all on demand. You know, they're, I think, a great example of a, of a company that's listened to their customers, understood, and maybe even gone a step further than understood, but anticipated what their customers were gonna want and delivered it before they knew they wanted it.

Do you think that's possible for a commercial bank today to be able to anticipate what their commercial clients are gonna want 5 or 10 years from now and start building that out and, and where would you start?.

Bryan Peckinpaugh: There'll always be some aspect that we can't predict, right? I mean that you, you'll see that with a lot of the failed companies over the years, right? Of, you know, Kodak being an example that just couldn't see the digital camera revolution coming and, and ended up in a, in a world hurt. It it doesn't mean you stop, right? I think you, you, you've gotta put your time and effort into understanding where the market's going, understanding where those shifts in customer expectation are and, and trying to meet it wherever possible.

What I would say, Is, I would always encourage to focus on our core business first. It's very easy to get wrapped up in, for example, the cryptocurrency wave and say, and trying to predict that future, right? That's very speculative of, you know, am I betting on the right horse to, you know, uh, be, be in a position to capitalize on whichever cryptocurrency end up being the leader.

And then we saw the whole thing collapse, right? Uh, you're never going to miss out by investing in your lending technology. You're never gonna miss out by investing in your deposit technology. Those needs are always going to be there. So, so spending time thinking about what are those shifts in, you know, consumer and commercial customer behavior, uh, where do I see the market going?

Where do I see rates influencing the behaviors. And how do I meet them where we think they're gonna go. If you spend the time in your core businesses, I think you'll always come out ahead as opposed to, you know, trying to catch the wave, the next big thing. Then you're just playing a, a speculative game.

David Catalano: Yeah, I agree with what you're talking about there. Um, Bryan, focus and grow. Grow, grow where you're planted. Grow with what you're really good at doing and just continue to get better and better and better at, at that and build your culture and you'll attract people, you'll attract customers. 

Mitch Woods: Well, awesome takeaways, guys. I think this was a great discussion and, and really anyone out there listening to today's episode, I feel like could take a lot of ideas away to really think about how am I empowering not only my employees, but then also how am I empowering my, my customers to do business with me in an easier way. So I think some some great takeaways.

So thanks everyone out there for listening to today's episode of Lending Made Easy.