Online Digital Lending Solutions for Credit Unions & Banks

It’s been many years since banking required bankers to build deep, personal relationships with their customers. Bankers used to know their customers by name and vice versa. That’s because opening an account, making a deposit, or cashing a check meant customers went into the local branch—and often sat down and talked to someone. And having a personal relationship with your banker wasn’t bad, especially when you needed to apply for a loan.

But the digital age and customer self-service have changed all that. Account creation, funding, deposits, and bill payments are all available via a web browser or mobile app. Indeed, even though 81 percent of Gen Z’ers have already opened banking accounts, most have never stepped foot into a brick-and-mortar bank or credit union.

Except to apply for a loan, that is. While most banks and credit unions offer self-service for typical deposit accounts, their digital transformation efforts have barely touched the lending process. Other than providing an online or downloadable application to get things started—and perhaps letting you view your balance and make payments online afterward—nothing much has changed over the decades.

Online lending solutions pose a challenge to lenders’ brand loyalty

Over the last few years, banks and credit unions have watched tech and retail giants like Google, Apple, and Walmart jump into the banking world. The defection of banking customers to these providers is remarkable since the online banking and credit card services they provide aren’t all that different from what banks and credit unions offer. It shows that loyalty to your local branch bank is something these institutions can no longer take for granted.

It’s the marketplace lenders (MPLs) that banks and credit unions have to worry about. Without the broad range of services expected from traditional banks and credit unions, these digital-native lenders can focus on doing one thing well: providing a seamless, simple online lending experience. And judging from the 38 percent market share of new loans these MPLs have already taken from other lenders, their approach is paying off.

Offering online comparison shopping for loans, followed by a seamless, soup-to-nuts experience from the funding application, is something most banks and credit unions don’t offer. So, how can they expect brand loyalty when their customers need a new loan, much less attract new borrowers?

Rekindling customer loyalty with online lending solutions

As in any service-oriented market, banks and credit unions must provide what today’s customer wants and needs to remain competitive. Indeed, the success of MPLs proves that the modern borrower is frustrated by the disjointed, opaque application and underwriting process at banks and credit unions. So, if the latter wants to sign up new borrowers—and keep their existing customers faithful—they must offer an online lending solution that provides choice, transparency, and a seamless, end-to-end experience.

Of course, they face challenges when upgrading the customer’s experience to this extent, including:

• Changes to physical infrastructure and software
• Integration with their existing underwriting, risk management, and other back-office systems
• Revamping, automating, or replacing inefficient, manual processes
• Building the integrated online loan shopping and application experience itself
• Somehow “plugging into” the online loan marketplace so they can attract new borrowers

Perhaps the most daunting aspect of all is that—on top of any existing digital transformation efforts—many local, regional, and state banks don’t have the IT staff, budget, or expertise to accomplish all this.

Regardless, banks and credit unions must tackle this challenge if they want to slow or reverse their loss of market share for new consumer loans. Even existing banking customers are turning to online lenders for new loans, not only for the simpler, user-friendly borrowing experience but also because they can shop to find the offer that best fits their needs. Providing this experience for bank or credit union customers might incentivize them to look for that new loan closer to home—and even re-instill some customer loyalty that seems to have disappeared from today’s banking.

Instead of facing the challenge alone, lenders can leverage loan lead generation and SaaS lending software from a provider with deep experience in risk management and online lending solutions. That way, they can attract and retain customers with smart, best-of-breed, self-service tools with the digital experience they crave—without hiring an army of programmers or breaking the proverbial bank.

For more on how banks and credit unions can leverage risk management and online lending solutions to bring their lending process into the digital age, download our latest whitepaper:

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