There are certainly times when it’s important to build redundancy into your systems. Case in point: when your computer goes on the fritz and your files are saved on a backup hard drive; or if a superstorm knocks out power, and a generator keeps your home up and running. In other instances, like in banking, a secondary system or process can actually make your primary one less efficient. That’s why we advise banks to resist using Mirador in conjunction with other manual SMB loan origination processes. In fact, we’ve found this is perhaps the single-most important best practice for ensuring your online lending platform is successful.
When a bank fully automates its small business lending, both lender and borrower benefit, especially throughout the application process. For the bank, loan origination costs can decrease by 25 to 50 percent and loan officers devote little to no time declining “clear no” loans, according to a case study with Excelsior Growth Fund. Borrowers benefit from convenient access to the loan application that they can complete whenever it suits their schedule, not just during banking hours. Everybody wins.
But when a bank insists on running hybrid or parallel systems, it can be both confusing and inefficient. In one instance, a bank had gathered all the loan information for a $15,000 loan request from a customer via email and had to make numerous phone calls to answer questions about required documents, only to later realize this would have been the perfect opportunity to have the applicant apply through Mirador. That’s double the work for both the borrower and the bank — negating any financial or time gains that automation would’ve achieved, especially on small-dollar loans. (This bank has since realized the inefficiencies involved and switched to an automated process post-launch, so the applicant can begin the application online, freeing a loan officer for higher-dollar loans.)
A fintech-driven loan process reduces the time borrowers spend shopping for a loan and gives them faster access to capital on more affordable borrowing terms. If your financial institution insists on sticking with a hybrid manual-automated origination process, the customer loses out on most, if not all, of these benefits.
What makes banks reluctant to automate their online lending process fully? In a word, relationships. Going with a hybrid model happens repeatedly because banks pride themselves on relationship-based, hands-on friendly customer service. The thought of fully transitioning to an online loan application makes them worry they’re turning over their valuable customers to an impersonal, faceless digital entity. But there’s plenty of ways that banks can fully commit to technology while maintaining important touch points with the customer. In fact, the right solution can even augment a bank’s emphasis on stellar service with a “high-tech, high-touch” solution.
For instance, lenders can offer a computer kiosk inside the branch, where borrowers can apply online with a loan officer standing by. (Younger borrowers will probably be happy to go through the process on their own.) Additionally, bank employees can document customer interactions on the Mirador platform — ensuring that important follow-up conversations happen and questions get answered. They can also check on an individual borrower’s progress through the application and reach out directly to answer any questions. These forms of collaboration between technology and bank employees actually enhance the customer service experience instead of diminishing it.
What’s the best way for banks to proceed while addressing these concerns? We suggest an incremental approach to automating loan origination.
- Launch your solution on a sub-set of loan products within SMB lending, and make those products available exclusively through the platform to both existing and brand-new customers. We’ve found that piloting a new process like this to just one group or the other is a recipe for failure and confusion. After all, if only some borrowers can fill out an online application, others will wonder why they can’t.
- Ensure your bank relationship staff is trained to explain which products are available online – set clear lines for launch to alleviate both customer and internal confusion.
- After your initial launch, you can expand to offer additional loan products online with confidence. Because the technological infrastructure already exists and your employees understand how to use the tool, any process disruption will be minimal.
By taking these steps, you’re bound to see operational efficiencies increase. Learn even more about upgrade practices by checking out 6 Steps to Expanding Small Business Lending.