The trend: In a departure from traditional methods that were slower and more manual, financial institutions (FIs) of varying sizes are digitizing their lending businesses, emphasizing speed and efficiency in loan processing, per American Banker.  

What digital lending entails: Previously, banks took weeks to underwrite loans; now, they aim to reduce this to just a few hours. This shift is driven by the adoption of automated tools and digital processes, which streamline operations and improve customer satisfaction. Examples include:

• Adopting digital data sources 
• Making that data more consistent throughout the entire organization
• Automating client onboarding
• Incorporating new tools such as robotic process automation or genAI

Next steps: Lending process digitization will vary by an organization’s size. For example, many larger FIs have left the consumer lending space and aim to speed up commercial lending processes, while smaller ones simply want to expand their lending customer base as quickly as possible. 

• According to American Banker, Citibank has focused on automating multiple commercial lending processes, such as underwriting, document submission, and validation—and integrating diverse technology stacks to enhance efficiency and reduce turnaround times in commercial lending.
• And Texas Dow Employees Credit Union (TDECU) is developing a digital lending infrastructure, including plans for a co-branded credit card with QR-code-based onboarding, aiming to streamline applicant efficiency and expand customer accessibility within Texas.

Key takeaways: Although many large lenders especially have started to digitize their various lending processes, there’s still room for improvement, per Accenture. 

• And there are clear risks in not examining each step of the lending process for potential digital improvements: Slower processes mean higher overhead costs, fewer loan originations, and less satisfied clients.

The possibilities for digitizing the lending business are seemingly endless, and FIs that rely on their old, manual lending processes could soon be left in the dust.

• The initial cost burden may seem higher for smaller FIs that haven’t begun this process, but there are numerous third-party providers that specialize in this type of digital transformation.

Dive deeper into the competition traditional lenders are up against, and why it’s important to boost lending business profitability by reading “Consumer Lending Trends 2024.”