How to Achieve Scale & Visibility in Loan Acquisition Programs

Many banks and credit unions are seeing a shift in behavior as more consumers turn to fintechs and point of purchase lenders, instead of seeking these loans directly from a financial institution. Credit unions can use this as an opportunity to solve two important business challenges – first, how to deploy excess liquidity, and second, how to continue to grow the member base and loans by partnering with fintech firms and indirect lenders to originate new member loans.

Loan partnership programs can be a seemingly limitless growth driver or a compliance and resource nightmare. Below are some recommendations for creating a well-oiled loan growth engine at your credit union.

Choose the right fintech partner(s). When venturing into loan acquisition, a credit union must first pick the right partner that aligns with its membership, credit and risk tolerance. Fintech companies can help the credit union meet digital membership goals and lending objectives, but the due diligence with these partners is critical. Non-banking providers can deliver financing options directly into retail or point of sale flows for their customers, but they need the help of a traditional financial institution, like a credit union, to service the loan after origination. The partner you select should be aligned with the values of the credit union in multiple areas, including member experience, credit quality, compliance and information security. In most cases, the loan program partner will manage the initial application, verification and funding. The credit union has agreements to originate and in some cases services the loans aligned with its risk and membership profile. These borrowers then become new members, expanding the credit union’s membership base and potentially increasing demand for other services.

Build for scale from the start. These programs have historically lacked scalability due to inefficient manual processes and a lack of visibility into loan performance. If the partner and the credit union are exchanging spreadsheets, .pdf and .zip files, they are creating a need to hire more staff for manual processing, booking and quality control for loans as they are originated. Aggregating and understanding the data becomes a monumental task as loan volume grows. A disjointed process with siloed data also means that there is no visibility into the process for the credit union and program goals cannot be closely monitored. Quality control and compliance become an afterthought that can only be discovered well down the road, as the loans season.

Remove bottlenecks and silos through automation. If the program is built correctly from the start, it should be easy to view, analyze and report on the loan program – that way you never lose control and oversight of the process. Organize the data intake and documents into an easy-to-use dashboard. Loans should automatically be analyzed for missing data and to ensure they meet the credit union’s risk profile. Automate the digital opening of memberships or loans and build in quality checks – this should include checks for credit quality, data quality, and alignment to underwriting and agreement stipulations.

Automate quality control completely and the right way, the first time. This is where many financial institutions stumble. The most common options are in-house development of a solution to map data, a custom developed outsourced solution that completes data transfer, and leveraging a SaaS process automation platform. In-house development programs are often competing for resources, and the skills needed to build a fully-automated solution that can check for completeness and quality before the loan is added to the credit union’s books and records may not be available in-house. Custom outsourced solutions can be costly, do not provide the workflows needed to handle exceptions and take too long to implement. But SaaS process automation platforms provide the ability to not only import the data but analyze the completeness and accuracy of the loan file, take samples for underwriting review based on a risk-based approach, and generate workflows that route and track loans for manual review only when needed, while the manual steps of booking and boarding loans into your system for member creation, maintenance and reporting automatically are being completed.

Loan Acquisition Automation Best Practices

• Build a program where the members and loans are analyzed and digitally opened in your core.
• The solution should upload the loan documents directly into the core’s document management system.
• Be proactive in reviewing membership and credit criteria before accepting the loans from your partners.
• Monitor performance and create risk review criteria to ensure unwanted loans and data errors do not impact the lending program’s success.

A properly built program should be easy to scale without increasing risk or adding resources. If done correctly, you should have improved visibility into loan quality as well as real-time reporting for long-term decision making. This repeatable framework can be used with other fintechs or indirect loan channels providing third-party origination, allowing the credit union to continue to grow its member base and revenue.

Christina Evans is the Director of Compliance Products and Solution Consultant at FINBOA, Inc., a Houston-based provider of intelligent process automation solutions to banks and credit unions.