By Brad Tompkins
Lending Data and Technology: Empowering Underserved Customers
Lending Data and Technology: Empowering Underserved CustomersIn April, the Federal Deposit Insurance Corp. (FDIC) unveiled a revised economic inclusion plan aiming to advance financial stability by encouraging lending in underserved communities. According to the FDIC website, the second stage of this plan is building household financial stability, specifically by increasing the percentage of households that have access to banking products and services to manage fluctuations in income and expenses. These initiatives focus on helping to promote the widespread availability and use of safe, affordable, and sustainable financial products, such as loans, from insured depository institutions.
Community banks have always strived to best serve the communities they are in. However, reaching financially underserved customers or communities within the areas in which they operate presents challenges. Many community banks have great intentions but not the right tools to do so effectively.
For example, the software and underwriting guidelines banks use for corporate loans in the tens of thousands of dollars, mortgages in the hundreds of thousands of dollars and auto loans secured by collateral are not suitable for determining the viability of loan applications of a few hundred or thousands of dollars. However, non-depository lenders and neobanks have successfully served these communities for years by leveraging specialized software solutions engineered to better analyze borrower risk using alternative credit assessment tools, mobile-first communication platforms, and other servicing options calibrated to this group of borrowers.
What are these tools, and how can banks implement them to help provide their underserved customer solutions?
Learning From Non-Depository Lenders: Leveraging Technology
Non-depository lenders and neobanks have found a winning strategy in meeting their communities where they are, employing customer preferred, mobile-first lending applications and online customer portals for loan self-servicing. According to GOBankingRates, 59% of Americans prefer to bank via their bank’s mobile app. This not only caters to customers’ banking preferences but also streamlines the loan management process.
Leveraging the convenience of mobile technology, loan applicants can take pictures of important documents like paystubs or other documents using their phone camera instead of scanning them in. Powerful features, including Esign, omnichannel communications, and multiple funding options, not only simplify the underwriting and origination process for customers but also enhance their view of the overall banking experience. Loan customers can receive alerts on their mobile devices, make payments through an online payment portal, or even request a new loan.
Bank staff are empowered with the control to customize the software to meet their needs throughout the loan management process, including the retention of documents, notes, or other data they want to track or measure. Configurability and workflow automation are key factors that benefit both lenders and their customers. For banking institutions, lending to underserved communities can feel daunting, especially if they have had very little experience doing so. However, with a configurable lending platform that includes powerful automation options throughout the loan life cycle and experienced servicing partners built-in, banks can easily manage loan risk exposure, ensuring lower default rates and repeat customers.
Banks can also enhance their user experience with customized options tailored to their customer needs. Enabling customers to choose their repayment options, such as frequency, allows banks to offer more loans, decrease delinquency and provide an enhanced customer experience. Certain platforms even allow customers to choose which day of the month payments are due in case customers need time for paychecks to clear.
The Importance of Comprehensive Loan Management Software
For banks new to serving alternative credit customers, it’s crucial to use tools that work seamlessly and offer comprehensive features throughout the loan life cycle. While many banks operate using a handful of disparate solutions across the entirety of the loan life cycle, this approach to loan management introduces the opportunity for errors, be they technical or manual, while also generally creating an inconsistent user experience for both customers and bank employees. An end-to-end loan management platform ensures that banks have full coverage over the entire loan process, providing a unified, intuitive customer experience from start to finish.
Provided as a turnkey solution, new loan origination is easy with the assistance of built-in tools like automated underwriting and alternative credit decisioning to KYC and servicing tasks such as customer alerts and even agent-assisted dialer technologies used in collections, without increasing the existing IT or staffing burden for institutions. The result? Lenders have the software tools they need to monitor every aspect of a loan quickly and easily while simultaneously providing a sense of security and confidence in their operations. As competition between community banks, credit unions, neobanks, and other non-depository lenders increases, banks need to invest in tools that enable them to reach out to financially excluded communities more efficiently.
Community banks can appeal to their neighbors through a specialized, end-to-end platform with a mobile-first design philosophy and configurable settings for institutions and customers. The industry is moving fast, and both community banks and non-depository lenders will continue to develop ways to meet the needs of their customers and communities, so banks need to invest now lest they be left behind.
About the Author
Brad Tompkins is Chief Information Officer at Vergent LMS, a comprehensive and adaptive loan management software solution which specializes in covering the entire loan cycle from origination to servicing, where he oversees the company’s product and technology initiatives. In this role, he supervises customer implementations and vendor integrations to ensure that Vergent’s platform is consistently performing at a high level for all users and partners.
For more articles from Great Lakes Banker Magazine, visit www.greatlakesbanker.com.
