We’ve all been there: Wasting too much time navigating crowded malls and waiting on countless lines in search of that perfect gift. When online shopping became mainstream, many shoppers waved goodbye to the inconvenience associated with traditional brick-and-mortar retail, and elected to make purchases over the internet. Savvy shoppers found that they can buy the items they want—usually at better prices—without ever leaving the comfort of their home.
The dynamics that make online shopping a much more convenient and pleasurable experience are also impacting the way consumers apply for loans. Technology-savvy customers would prefer to avoid the hassle of driving to the branch and completing mountains of paper work when all these processes can easily be performed through a laptop, smartphone or tablet. New technology has inspired a whole universe of online lenders that are successfully tapping into consumer trends by offering easy access to consumer loans at attractive rates—all without the overhead of maintaining branches. It’s a reality that only continues to gain momentum. For example, American Banker reports that online lending grew a staggering 700 percent over the past five years. And, Chase Auto Finance just reported that 20 percent of consumers have already secured an auto loan online, and 47 percent indicated they would do so if the technology was available.
The choice is that stark. Online lending is not a trend, it is mainstream. Banks, credit unions, and finance companies face a simple choice in dealing with this competitive threat: launch their own branded online lending solution to satisfy the changing demands of customers, or don’t, and watch their customer base evaporate.
Adding online lending capabilities—and creating an optimal experience for consumers—is a necessity for any traditional lender. Implementing a program is not complicated or expensive—if you chose the right solution. It shouldn’t detract from branch activities; in fact, online lending allows financial institutions to extend core value propositions into the digital marketplace. There are just three simple rules to follow: flexibility, convenience, and security. For lenders, flexibility is essential. The freedom to change lending programs and rules in short order gives the financial institution the opportunity to aggressively compete in a crowded marketplace. Consumers, for their part, want convenience. This means expediency, simplicity, and accessibility from any device and any location. In their mind, the application is the means to an end. So, creating an online experience that enables customers to complete the application quickly and securely helps them achieve their objectives. And, all parties in the lending ecosystem require strong authentication and security tools to verify online applicants and to keep their data safe.
Lenders looking to successfully implement online lending programs must evaluate several criteria to choose the loan origination system that works best for their needs. These attributes include:
- A configurable platform that allows the lender to create, change and manage all lending forms, rules, decisioning parameters and workflows, without having to resort to time-delaying IT resources
- Auto-decisioning capabilities that expedite loan approval
- Robust authentication technology (ID) that utilizes advanced algorithms and big data
A responsive consumer portal that is optimized for mobile devices, and securely stores customer data
- Auto-save features that securely store customer data so that customers can start an application on one device, save it, and complete it on another device when they’re ready
- A single sign-on that is integrated with the lender’s database, enabling all pertinent personal information to automatically transfer directly into the loan application
The ability to cross sell ancillary loan products during the approval process
- Enabling consumers to open new accounts, such as a checking, within the loan application process
- Facilitating upload of documents, images and other loan stipulations from scanners and camera phones
All these features and capabilities represent the bare minimum that a robust LOS platform should deliver—anything short of these will put the institution at a distinct disadvantage. On top of that, the LOS vendor should have a strong support team that is experienced in helping lenders make the transition into online lending.
There’s no better time than now for traditional financial institutions to offer their own online lending programs. The market trends are obvious; it’s time to regain market share. Online lending is straightforward, profitable, and most importantly, what the market demands.
This article was first published at TCI Credit.
As co-founder and president of Teledata Communications, Inc., Bill Nass is responsible for the company’s sales, marketing, product development and strategic third-party relationships. Bill has over 25 years of experience in the lending sector, and is actively involved with several industry associations. In addition, Bill serves on the American Financial Services Association’s (AFSA) Associate Advisory and E-Commerce Committee. Bill holds a B.A. from the University of Maryland.