Leveraging the Power of Lending Transformed

As the economy continues to reel from the surge of demand after reopening, lending finds itself in the middle of the conflicting challenges of economy and innovation. The basic functionality of lending has gone unchanged for years and as global events unfold, so too do new developments. While the congruency between ideation, and circumstance begin to falter, the forward momentum remains full steam ahead.

The speed at which we have come to expect service has only increased thanks to the Amazon-like experiences and other various sizable digital service providers. The lending market has made significant strides to once stagnant processes, which many members have experienced gainfully and firsthand as a result of the pandemic.

Although much has changed already, change is not likely to slow or stop any time soon. Here some areas that are expected to change as more credit unions deploy their digital optimization strategies:

Physical locations: As physical locations weaken in relevance, lending is giving way to the incursion of digital amenities. Lenders can process digital files faster; buyers can sign and notarize documents in minutes, allowing faster closings, which also generates cost-saving opportunities from printing to mileage. Lenders have and will continue to be required to review their technology stacks to discover where further cost, labor and time savings can be realized. Artificial intelligence is now a digital concierge at the ready.

Payment forms: Standard payment forms have come a long way from payments requiring in-person visits to phone, credit card, auto-withdrawal and other online options.

Competition: Competition was once heating up with non-bank entities. Now, when appropriate, lenders have sought opportunity for collaboration with fintechs instead. The idea of partnering with those maintaining singular proficiencies brings a synergistic relationship.

Credit: Today’s lenders are turning to AI to analyze the risks and rewards of consumer lending. The amount of data available to the financial sector is only growing and will increasingly be used to discover better decision-making methods that may affect the relevance of credit scores and allow for greater access to credit for the underbanked.

Personalization: Data-driven strategic positioning has brought about a new standard of personalization in lending, which allows lenders to treat every consumer as if they were its single, utmost priority. It can enable rapid lending, intuitive product suggestions and bundling, comprehensive direction on complementary purchases, and budgeting recommendations based on inputs like real-time location and spending and expense profiles. Think about the advantage of presenting your members with a personalized solution by video versus a text-heavy, visually straining email.

Regulation: The preliminary shift toward digital lending resulted in increased and impromptu regulation. Continuous transformations of this magnitude will ultimately force policymakers to identify emerging threat trajectories and comprehensively address all potential associated risks. Lenders may see a rise in new licensing and supervisory bodies as the need for global standardization arises. Having a strong partner and another set of eyes is a tremendous offense and defense to the shifting sands of regulations.

What began with in-person loan origination requirements has now evolved into the utilization of available and, most importantly, verifiable digital information. The end-to-end intuitiveness of digital lending has improved timelines from months to weeks by eliminating manual processes and heightened friction involving paper documents that must be signed, delivered or held by originating and involved parties.

However, despite the great advancements thrust into action by the pandemic, we are contending with unfortunate lasting issues. Pressures from rising fuel prices and supply-chain disruptions have added to already-high inflation, which led to the Federal Reserve’s recent rate increases. Upward pressure on interest rates creates downward pressure on the demand for goods and services, hampering the growth of business and consumer spending. The primary concern with these actions is the potential for creating a recession.

We may not be able to predict the future, but the post-slowdown outlook seems reliably bleak for the lending industry. Nevertheless, while the government pulls at economic strings, the lending industry will undoubtedly forge ahead in its digital optimization strategies to improve process flow and the overall consumer experience.

Charlie Peterson SVP, Allied Solutions Carmel, Ind.