Society has witnessed the spread of automation across financial services in the last decade, driven by the rise of digital technology and its capability to shape the way consumers and businesses interact.

The use of application programming interfaces (APIs) – enabling connectivity and data sharing across different software platforms and systems – has heralded much innovation in automating previously manual processes. And, crucially, APIs are delivering better functionality which is revolutionising how customers deal with financial institutions, notably lenders. APIs will continue to grow in importance, helping to reshape the customer experience and enabling faster and more effective digital transformation across the sector. 

APIs can facilitate the onboarding of new prospects and existing customer data straight to the lender’s loan origination platform. After data is received, lender-defined business rules can automate the next step, differentiating between loan applications that are ready for decision and loan applications that require more documentation.

So, an automated loan processing system can lighten the load for lenders. Time-consuming processes are condensed and simplified, speeding up applications, administration, decision-making and approvals. This not only brings greater costs efficiency, it improves productivity through enhanced search and retrieval of documentation and avoids duplication of information between departments.

Automation can also help strengthen the audit trail of accountability to limit risk exposure and maintain robust governance and compliance procedures, particularly in a sector with ever-changing regulation.

Tech-led expertise in the automation of end-to-end loan management services from leading players in outsourced solutions is removing the need for lenders to invest in proprietary systems.

There are, however, benefits that go far beyond cost and process efficiencies in choosing to outsource. And it is the area of customer engagement and retention where real returns can be made.

Agile lending technologies can now connect lenders to alternative loan products at the point of decline enabling lenders to adopt a more versatile approach, rather than turning down an applicant and leaving them to look elsewhere.

Specialist outsourcers enable lenders to tap into extensive lender panels and match declined customers with affordable alternatives that they are likely to qualify for. This has the potential to turn a ‘no’ into a positive opportunity, generating a new revenue steam by immediately identifying viable alternative options for newly-declined applicants.

Findings from Great Expectations: The Demanding Market for Credit, a report by Equiniti Credit Services into consumer attitudes to credit, showed that 68% of those surveyed indicated they would likely accept an alternative loan offer, if it was offered to them immediately after they had been declined.

So, instead of losing the customer, lenders can focus on safeguarding the relationship by identifying alternative loan products, ideally from their own portfolio. And since the application data is already available the transition process can be dramatically reduced, saving time for everyone.

Speed of service now dictates consumer decision-making in the digital world, and with it attitudes to the reputation of brands and consumer loyalty towards them. Again, automation in loan management is a key factor.

Almost two-thirds (63%) of those surveyed by Equiniti wanted credit to be available in less than 24hrs after the lender has granted approval, with more than a quarter (28%) expecting half a day, or less.

Creating a digital consumer experience and doing away with paper in the process is a growing influence. The age of applicants plays its part, but we found that eight in 10 millennials and generation-x are happy signing electronically if it means getting the loan faster, and even among baby boomers the figure is 60%.

Specialist outsourcers in loan administration are the driving force behind continued API-led agile technology breakthroughs that can support lenders to keep pace with digital consumer preferences and practice.

This brings hidden value beyond time and cost efficiencies by engaging customers, even when initial applications are declined, thereby building trust, new and repeat business and maintaining the quality of the loan portfolio with a base of satisfied customers.

Richard Carter, Managing Director, Equiniti Credit Services