How Automated Credit Decisioning Systems Are Improving Lender/Customer Interactions

Loan origination software that offers automated credit decisioning capabilities can allow lenders to develop smoother business processes, though in the wake of the financial crisis several years ago, some lenders are still hesitant to rely on process automation solutions.

Automated vs. Manual Credit Decisioning Systems

These lenders might take stock in the viewpoint that manual decisioning is more accurate and efficient, a myth that can cost these businesses the benefits of consistency and efficiency offered by automated decisioning. The value of this approach is proven in the stronger customer interactions many banks now enjoy after automating the origination process.

John DeMarchis of PNC shared his experience with American Banker, saying his bank’s recently implemented portfolio management software yields greater cross-sell opportunities without leading to interactions that frustrate and alienate consumers. “It’s extremely exciting,” DeMarchis told American Banker. “We view it as having huge possibilities in terms of how we interact with our customers.”

The Digital Transformation

The era of manual applications is the past. It’s time to get smarter about your decisioning system and how your potential borrower will interact with it. A study from Cornerstone Advisors found that only one fourth of banks and credit unions took initiative on launching a digital transformation strategy prior to 2019. Today’s consumers have come to expect an easy online application, convenient document uploading, instant decisioning, and quick funding.

How It Affects the Borrower Journey

The traditional journey includes origination, decisioning, acceptance, and lastly, servicing. The most important aspect is that the potential borrower moves through each of these steps smoothly and quickly. If there is a lag or pause in the process, they may become uninterested and look for another option.

Origination – By providing the customer with a convenient, online application and digital document capture, it allows them to complete their application anytime from anywhere.

Decisioning – Lenders set their credit policies and rules that the automated system follows allowing manual underwriters to focus more on unique cases. The applicants receive a yes/no within seconds after submitting the application.

Acceptance – With the implementation of e-contracts and signatures, the potential borrower can conveniently review the terms and accept without having to go in-person.

Servicing – The customer receives their funding with minimal amount of lag time and can access their account status, payment history, and more from anywhere anytime.

The Benefits of an Automated Credit Decision System for Lenders

An automated decisioning system doesn’t just benefit the consumer, it’s also extremely beneficial for the lender. Those benefits include:

  • Eliminated delays and costs associated with paper documents
  • Minimized manual tasks that delay decisioning
  • Reduced human error due to consistent compliance by implementing credit policies and decisioning criteria
  • Lower customer support costs

Inbound customer inquiries have traditionally been a minefield for some banks, as they run the risk of marketing products that the customer either does not want or already has. However, with business process automation solutions, manual data entry and retrieval is eliminated, speeding the time in which bank representatives can secure customer data and offer the most suitable product without losing out on a potential cross-sell opportunity.

The most effective automated credit decisioning systems are those that allow for flexible standards that adhere to the specific institution’s credit policies and requirements. While some lenders may assume automated decisioning systems are too rigid, the reality is that the most effective products available can be configured easily by administrators. And if a bank’s current decisioning software solution does not allow for this flexibility, it may be time to consider a new product.

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