How to Overcome Consumer Lending Challenges for Profitability

Did you ever imagine a time when you could buy a car online and have it show up in your driveway a few days later? Today, many of the tasks consumers once did in person, like buying groceries or getting dinner from a restaurant, have been transformed by digitalization.

The coronavirus pandemic has only heightened this dramatic shift toward high-tech, low-touch online offerings. The disruption in retail has also affected retail banking. Members want fast, simple and easy. However, making this expectation a reality is easier said than done, as a typical credit union’s consumer lending process can involve many different systems, people and processes.

Many credit unions demonstrated their nimbleness on the commercial or member business lending side during the pandemic with the Paycheck Protection Program (PPP). For credit unions to participate in PPP, they had to become more tech-savvy to navigate changing member needs and expectations throughout the waves of the pandemic. A similar transformation on the retail side will be necessary for success in consumer lending in today’s environment.

Automating Consumer Lending to Become More Competitive & Profitable

Retail banking is increasingly competitive, especially with the influx of fintechs like LendingTree and Rocket Loans. In this competitive digital market, credit unions will have to lean into digital adoption to satisfy changing member expectations. Consumers can easily find information about the importance and ease of shopping for retail loans among online lenders and traditional financial institutions. So, how will your credit union set itself apart and be the one that he or she chooses? How can it compete?

The good news for credit unions is that they have already demonstrated their ability to leverage digital tools to create a better, faster lending experience. An important aspect to becoming more competitive, faster and, therefore, more profitable in the retail lending space comes down to scalability. Manual, repetitive data entry, physical applications and signatures, and chasing members down for additional documents wastes valuable time for the lender and frustrates the member. For example, with the right technology, like a loan origination system (LOS), credit unions can transform inefficient processes for a frictionless lending experience.

With an LOS, credit unions can offer a fully digital retail lending experience to their members, where they can quickly apply for loans, securely upload documents and electronically sign for a loan online anytime, anywhere. Mobile-friendly, member-centric platforms put the consumer in the driver’s seat, allowing them to quickly and easily apply for their loan.

Meanwhile, the credit union can perform quick analyses and automate the decisioning process with an end-to-end digital LOS, helping to ensure efficiency, consistency and scalability. With an integrated relationship manager to track the credit union’s member pipeline and notify lenders of upcoming tasks and automated workflow templates, an LOS optimizes many areas of consumer lending. Credit unions that can make fast, creditworthy decisions give themselves a much-needed advantage in a competitive consumer lending environment.

“With loan origination systems, you only have to touch the data once. One touch and it propagates,” Abrigo Solutions Consultant Marc Meoli said. The lender can focus on new banking relationships rather than chasing down documents and re-inputting the member’s information. “This is how a credit union gains efficiencies and grows relationships,” Meoli said.

Technology is important to driving efficiency, but purchasing it doesn’t automatically make a credit union more effective. It can be challenging to implement new technology, both from a technical and change management perspective without proper planning.

A credit union looking to leverage a loan origination system successfully will consider how it will integrate with other technologies already in place. Will this technology be another siloed system, or can it seamlessly integrate and “talk” with other software already in place? Cross-application functionality and software will allow for better data optimization and reporting, and increase transparency.

A seamless system will also significantly help buy-in and usage among users at the credit union. To further promote strong adoption of an LOS, users should receive adequate training and support from the technology provider. Managing “the people side of change” can help institutions maximize their LOS’s potential.

Fostering a Better Member Experience

Many credit unions were able to gain new members through their swift response to the PPP. These institutions were the heroes of PPP, reacting quickly to the program and implementing technology to scale their processes to meet the high volume of applications. Being able to help these member businesses during a difficult time garnered a lot of goodwill and member loyalty – but can credit unions keep it? Can credit unions use the same approach they used to transform the PPP process for other areas of lending to foster deeper member relationships?

A key part of that initiative will be moving away from siloed, disparate systems and investing in technology that enables a single point of data entry to help break down data barriers. Fully centralized and integrated data gives credit unions better insights – from areas of risk to growth opportunities – to drive smarter, faster decisioning.

Centralization, automation and efficiency gains are also important for better member service. Consumers have adapted quickly to their newfound remote lifestyles, heightening the importance of efficient, effective digital offerings. Going forward, credit unions will have to make a conscious effort to deliver high-level service with remote delivery. Enhancing the member experience means delivering on expectations with digital offerings.

Kylee Wooten is media relations manager for Abrigo, a provider of compliance, credit risk and lending solutions based in Austin, Texas.