Are you making the best use of your lending technology stack?

The following article has been authored by Mr. Rajesh Sabhlok, Managing Director, Asia Pacific, Vymo

No period in time impacted consumer behavior as much as the two years of the pandemic. Customers today expect personalization and diverse options in any business transaction they are a part of. After all, they are used to Netflix recommending a TV series they’re inclined to like most or a Zomato and Swiggy recommending a meal they are most likely craving on a Wednesday evening.

Such convenience has set new standards of what we can and should expect from using a technology platform. Yet, today, applications in financial institutions (FIs), especially on the lending side, still put a strain on customers to select products manually and then fill out lengthy paper forms requiring a plethora of supporting documentation.

While core systems have undergone a massive transformation over the years, the customer experience part of their tech stack still hasn’t evolved to offer a frictionless experience compared to an Amazon or Netflix.

For example, a consumer with an existing education loan can be recommended a new repayment scheme. And maybe contextually nudged towards a new savings plan when he takes up a new employment post his graduation from the education he was pursuing.

The expectations from here on are only going to rise.

As India gears towards a digital future with India Tech Stack, Jan Dhan 3.0, and numerous other initiatives, FIs need to not only get ahead of the neobanks, neo insurers and new-age fintechs but also leverage the ecosystem to offer unparalleled customer experiences to ever more demanding customers, who are also looking for instant gratification, access to service 24 x7 across any channel of their choice.

But before that, let’s look closer at the biggest issue on hand and how FIs can help improve their lending experience.

Focusing on profitability

In the US, 1 in 3 adults cannot obtain a credit score from conventional credit scoring models and do not end up having a credit score. In India, 160 million are undeserved and 50% of the population is unserved. So, the data on which FIs rely to disburse loans already leaves out a major population, restricting their reach.

On another note, the pandemic pushed the need for agility and speed in the modern lending market and set new expectations around transparency and hybrid working, which were not as prevalent.

As a result, two strategic priorities emerge for lenders:

1. Reduce the time to approve lending deals
2. Push for more targeted and tailored credit evaluation

Finding new and better ways to determine the creditworthiness of individuals is one way to increase business and acquire new customers. While on the other hand, eliminating administrative overhead and delays is a way to maximize profitability for each loan account created.

Maximizing your tech stack effectiveness

Here are four improvements technology can bring to your process.

1. Enable your frontline to deliver a better customer experience

Your frontline salesforce already has many tasks such as lead generation, lead nurturing, customer onboarding, account opening, loan processing, etc. In all this, where is the time left for them to spend on customer experience?

Lenders should have an ongoing discipline to utilize their data to spot patterns, recognize behaviors, and form trends based on real-time analytics.

What they really need is a system that can help them,

• Prioritize leads and map them to the right seller
• Quickly access information risk profile, product interests, and eligibility
• Identify and recommend best practices to nurture this lead
• Provide a holistic view of lead status so relationship managers can intervene/ support accordingly
  And if this can be accessed via a single pane of glass, it will truly empower the frontline to scale up efficiency and customer experience.

2. Close the customer feedback loop to build a CX roadmap

Customer feedback is a goldmine, but lending systems are yet to evolve to process this huge amount of feedback data. Automated reporting and real-time feedback are vital, especially because they can have a knock-on effect on the entire system.

Online reviews, mobile app surveys, and social media surveys are common ways to collect feedback. Data analytics of this feedback and finding pressing issues will give you a roadmap of how you can grow the bank in the future.

3. Automate Credit Decisioning

Chen Xiuwei, an entrepreneur from China, was denied a loan after his business wasn’t doing well in the Covid era. Due to the urgency, he installed Webank, a Chinese neo bank app, and got a loan without any paperwork.

There must be ways to look at a person’s creditworthiness beyond the conventional score and rules. But how? AI-powered credit decisioning can help. It looks into data apart from the traditional details like:

• Bank account information
• Mobile phone payments
• Rent payments
• Cable TV payments

This data also conveys if a person is trustworthy. Neo FIs are using AI-powered credit decisioning and attracting the customers left out by other banking systems. AI-powered credit decisioning saves not only time but also attracts more customers.

4. Reduce the time to process loans

AI-powered credit decisioning reduces not only paperwork, but also the overall time to process loans. Firms like Jupiter and FamPay even offer same-day loan approval. Speed is key to winning customers and their loyalty. Studies show that responding to a customer within the first hour increases the chances of getting them onboard by a massive 10x times!

If FIs are to increase profitability through their lending arm, they must realign and substantiate their existing tech stack to further deliver on three counts: automation, agility and analytics.

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