How the Content Cloud differentiates your digital lending processes
The need for financial institutions to secure loan business in a deposit-rich environment is unparalleled. And, it's expected to remain if consumers continue to stockpile cash and pay down debt - both common responses in times of economic uncertainty. The good news: consumers continue to have a need to borrow. Consumers are looking to borrow across the spectrum from retail to small business to large corporations. Whilst not the most rate friendly environment, debt makes the world go around and in our current economic environment, banking and lending institutions continue to focus efforts on enhanced digital lending solutions. In this blog, we will explore the way a centralized content platform can drive a competitive approach to digital lending.
The applicant and employee woes
Lending as a practice has always been opaque to an applicant. In times gone by, prospective applicants would determine their decision to borrow driven predominantly by rate. Over time, that trend has pivoted as a result of rate neutrality and competition to determining the choice through the end applicant experiences that they could have with said institution - transparency into the process being one of them, mobile and accessible channels of interaction being another, and finally, where the time to fund is shortened to its most optimal.
Numerous systems of record and legacy siloed systems bodes for a disjointed employee and customer experience with digital only lenders not having this burden and thus starting to acquire market share. Not to say that applicants don't want to interact with a loan officer, a processor or even the third parties involved, but they do want to simplify a process that is saddled with inefficiency, risk and control issues — and not to mention, is a customer experience nightmare more often that not. There are a plethora of challenges for both customers and employees including manual review of documents, human touch-points in the processing, and underwriting stages that are wasteful and risky, requiring data entry, dual keying and repeated requests for information from a customer. Not to mention that most organizations’ underwriting practices are very subjective and automated.
According to research, home loans in the US take 30-75 days to close [1] and whilst there are stages of that required by CFPB law, such as the 3 day rule, there is a need to drive this down to both increase the throughput of the business and improve the end customer experience.
With data dispersed across all these tools, loan processes across the organization are slow, inefficient, and risky. Moving, copying, sharing, or emailing a single file can lead to risky errors, lost productivity, and inefficient and expensive duplication. Designed with content at the center, Box is the content cloud: one secure platform for managing the entire content journey — from the moment an applicant submits files, to when lending departments collaborate, approve, publish disclosures, sign, classify and retain documents. And throughout the entire loan journey, the Box Content Cloud protects you from unintentional or malicious data breaches and keeps you compliant with industry regulations around securing customer documents.
What would it take to 10x the loan origination process?
Taking a conventional US based residential refinance as an example, it would take investment in the business process and solutions that back the digital lending origination process. Digital lenders that are driving down the cycle time of a loan application are also able to reduce credit risk, save time and money, eliminate costly mistakes through automation. They are equipped to scale further and service more applications whilst protecting the balance sheet capital that is potentially at risk.
In order to make this happen, there is a need for a fresh look at the Digital Lending core of an organization and inspecting the front end channels of engagement (mobile, web, chat), the customer focused solutions like sales and marketing engines, the interaction and case management aspects of the customer and FI interaction, as well as how content and data is managed through this process. What this gives rise to is a core engine that is built to be nimble to change, expressly focused on the end user experience whilst maintaining the rigor and guardrails that are needed to protect credit risk. Point single vendor solutions in loan origination simply won't work here as they are generally catering to one persona and result in siloed information and a closed experience for the broader enterprise. Furthermore, they typically do one thing very well but not much more. Lending involves so many departments both internal and third party, fat finger errors are prolific, customer PII must be protected and the race to close a loan is the race to win. The single-vendor approach can also make businesses more vulnerable to threats, as flaws in one product will often be present across the entire suite.
In addition, it may restrict an organization’s ability to innovate as they have to wait for vendors to release new versions and features. From a functional and technical architecture standpoint, CIO's and business leaders need to look at a Cloud first SaaS solution environment for digital lending that focuses on key functions - including sales & marketing, unstructured & structured content, data and how to bring it all together into a set of solutions - there are numerous options but the best are the ones that play nicely together off the shelf and are "best of breed" in their respective areas. This may seem complex at first but the results when done successfully are one fully integrated system of combined best of breed technologies delivering on the needs of the lending value chain.
As I mentioned above, our objective is a happy customer and so here are some ideas that I have seen customers leverage the Box Content Cloud for when transforming the digital lending space:
- Automate and reply real time - Integrating ID/KYC verification solutions into your application process such that you can realtime verify a Driving License or a Passport, classify the nature of the document and extract the appropriate metadata
- Mobile first - Quite often you will see a lending process that necessitates the need for a scanner or a printer, how about using mobile capture techniques for document collection? It's easy and convenient and also ensures that Customer PII is securely handled from the get go
- eSignature - supporting native electronic signature is now table stakes. Many best of breed technologies will support a native solution including Box's very own eSignature features
- Use AI where possible - Fad or Future? Definitely the future, AI can automate underwriting accuracy, help with interpretation of documents and even go as far as to reduce bias that exists in a somewhat subjective process and adhering to Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA)
- Automated applications - what's the minimum information needed to start the application can be a way to design for a frictionless experience. Consider what info is required of the uniform residential loan application - 1003
- A single view of the customer - digital lending does not necessarily automate away all human involvement - processors, customer service reps and even underwriters need one view to avoid swivel chair and erroneous processing. The best of breed approach allows you to do this and service the customer in a timely and accurate manner and even expose that view to the customer. I saw a neat subway map user experience recently that showed the stages of the lending process, where the customer was at and how long they could expect before moving to the next stage. Now that is transparency!
- Use aggregators to source repeat content like bank/brokerage statements, W2, payslips etc and perform steps that are manual in nature like Verification of Income, Verification of Address or Verification of employment
- eClosing and remote Notary - where permissible support an electronic and remote closing process
Whilst this blog has looked across the lending origination and closing aspect of the value chain, it's also important to recognize the needs of a customer once a loan is funded across servicing, payments and even collections/hardship as we have seen through the global pandemic. The value of an integrated best of breed approach is further exacerbated when taking a broader view of the lending business.
With the Box Content Cloud, you can enable seamless collaboration and workflow, all while offering intuitive end-user loan experiences
- Allow access from anywhere, regardless of what device is being used and what file type is being worked on
- Enable content creation and collaboration, with built-in tools for external collaboration, note-taking and annotations, content submission, secure link sharing, and review this activity with robust access stats and reporting
- Power loan processes and centralize workflows in Box, including e-signature through Box Sign, user-driven no-code workflow through Box Relay, and task assignment to power approvals
In conclusion, in order to not only survive but excel in a market that Fannie Mae [2] predicts will continue to produce in excess of $2 trillion of mortgage originations in 2022, there are key technology considerations to be made and time is off the essence when it comes to investing. The old adage of "Go Big or Go Home" resonates here as competition is heightened and the bold will prevail and occupy market share of a customer base that wants to borrow. Once those customers have borrowed, there are endless opportunities to cross market/sell and grow revenue.
According to Forrester, Box is the leader [3] in Cloud Content Platforms and has been helping many FI's in the lending space. Learn more about how Box for financial services here.