4 Trends Expected to Shape the Commercial Lending Landscape Next Year

Earlier this month, the NCUA reported credit union loans increased 5.9% year-over-year in Q3 for a total of $1.1 trillion. Commercial loans, in particular, rose an impressive 13.2%, totaling $78 billion. This upward trend in commercial lending presents a significant opportunity for credit unions to better serve their business members and positively contribute to their own bottom lines.

However, the potential of commercial lending is still largely untapped by many credit unions, as they have traditionally shied away from this area because of its notoriously manual and paper-based nature. With 2020 right around the corner, savvy credit unions are evaluating strategies and tactics now that can help them streamline and enhance the commercial lending process next year. To most effectively embrace commercial lending and grow their portfolios, credit unions should assess the trends and activities that are anticipated to have the most impact on this space in the years to come.

Adoption of a Single Platform Philosophy

Commercial lending is often the last manual, paper-based frontier remaining in a credit union because institutions still frequently rely on disparate systems that don’t talk to one another. Maintaining multiple, clunky systems creates inefficiencies, prevents visibility into individual borrower relationships and the overall portfolio, and causes a poor member experience. In 2020, more institutions will abandon multi-platform lending systems and instead adopt a single, centralized platform approach to better and more efficiently serve all types of members – from consumers, small businesses and commercial members alike.

There are 30.7 million small businesses and counting in the United States, and credit unions are uniquely positioned to offer the tools, services and guidance that can help these businesses grow and succeed financially. A single platform approach will better equip credit unions to support these businesses and more effectively provide access to funding. Traditionally in this segment, underwriting lines have been blurred between personal and business assets and liabilities and expenditures, hindering the business borrower experience and minimizing revenue opportunities for credit unions. Small businesses often grow into big businesses, so if a credit union can provide a small business owner with a fair and favorable lending experience from the onset, that business owner has the potential to transform into a long-term, profitable borrower.

The future of lending is one-touch availability to financial services regardless of channel. This technology allows credit unions to reinforce relationship connections while fostering sound financial decisions.

A Rise in Technology Partnerships

Next year, the volume of vendor collaborations and partnerships will increase, which will prove to be a significant benefit to credit unions. Vendors are increasingly recognizing the value of focusing on their own niches or specialties and then partnering with other providers that can offer complementary skill sets and tools. For instance, a loan origination developer may integrate with a documentation provider to enable institutions to more efficiently manage the documents needed to make sound loan decisions. Or, a financial spreading provider may partner with a collateral management system to enable smarter risk management.

These partnerships are made possible through the use of APIs. Credit unions must evaluate and select technology partners that have the modern, open technology necessary to ensure integrations are seamless. In the coming years, loan origination systems will start to more closely resemble the International Space Station, where universal ports can be used to share data and enhance the overall experience by connecting previously separate systems. Migrating from data silos to closer, more sophisticated integration will enhance the way credit unions work with their business members as well as their technology partners.

The Dominance of the Member – and Lender – Experience

The user experience will remain arguably the most significant aspect of commercial lending. Today’s business owners expect instant and intuitive interactions from all service providers, including their financial institutions, so credit unions must meet these demands to compete. These aren’t the standards just set by borrowers, but by lenders as well.

Credit unions simply can’t afford to facilitate lender experiences that are anything less than efficient and enjoyable, especially in light of the current talent dilemma. Historically low unemployment rates, high levels of competition and tight budget restraints have exacerbated credit unions’ talent shortage. As a response, more credit unions will prioritize simplifying and streamlining interfaces to allow employees to more easily and quickly access meaningful, relevant data at the right times.

This “drill drown” technology approach improves the experience for a wide range of stakeholders across the credit union. For example, the executive can access dashboards; the lender can view underlying performance data; the operator is privy to various workflows and tasks; the regulator can see compliance data. A single, modern interface, if built correctly, can more effectively support each of these roles and boost the overall employee experience to ultimately improve recruiting and retention efforts.

Focus On Implementation and Training

In 2020, the commonly overlooked areas of implementation and training will be more widely prioritized. Credit unions are realizing that a system is more likely to be used ineffectively or below its full capability if the training process is difficult and full of friction. Lending platforms that are built to accommodate easy, quick onboarding by incorporating tools such as online assistance, instant chat support and workflow protocols will be most effective. More efficient, faster training and implementation will help lenders use their tools to the highest potential and in turn, better serve borrowers.

Lending continues to represent a notable opportunity in 2020 and beyond, especially for credit unions that haven’t fully embraced this area in the past. To most effectively compete, credit unions must observe the trends and activities expected to shape the lending space and form their plans accordingly. Leveraging single, centralized platforms, identifying strategic vendor partnerships, prioritizing the borrower and lender experience and paying more attention to training will well position credit unions to grow their portfolios and compete next year.

Pat True is a senior risk analyst for ProfitStars Lending Solutions in Allen, Texas.