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Benefits of Using Digital Lending Platform
A digital lending platform covers the entire loan lifecycle from application to disbursement into customers’ bank accounts. By digitizing and automating the lending process, the platform is transforming traditional banks into digital lenders.
In this article, let’s explore the benefits that a digital lending platform can bring to the table: what’s in it for both banks and their customers, and how digital lending platforms are disrupting the industry.
Optimize Loan Cycle
The digital lending platform is all about speed. The platform starts with automating the submission of a digital loan application and uploading of relevant documents, which traditionally would take customers a day off from work to complete.
Digital lending platforms are integrated with decisions rules to help evaluate the application in seconds. Moreover, background checks can access 3rd party credit bureaus to assess applicants’ creditworthiness and financial health. Credit bureau reports display applicants’ credit history and past defaults which can be used to reduce lender risk.
The platform can also cross-check employment details in the background. Based on the borrowers’ details and risks, the platform comes up with the most appropriate loan terms.
The digital lending platform also has fraud analytics capabilities with diverse AI/ML-based technologies. It only takes seconds to create a new loan contract that accepts electronic signatures.
The entire loan process is automated and accelerated thanks to the seamless integration between all these functionalities, which leads to considerable cost and time savings.
Easy capture of Applicant information
With a digital lending platform, banks can eliminate all geographical barriers since customers can originate loan applications wherever they are. After filling in his details and the loan products he prefers, applicants just need to upload identification documents onto their mobile app.
Most of today’s digital lending platforms can smartly fill information with eKYC technologies. This feature helps avoid typing errors and speed up the application process. They can even scan the bank statements for information within only seconds.
These features help to ensure a fast and convenient user experience.
Quicker Decision Making
The digital banking landscape is now more dynamic than ever. Every bank now wants everything, including loans, to be processed instantly in real-time. Customers are no longer willing to wait for days - not to mention to leave their homes - for a loan.
A digital lending platform enables lenders to automate the decision-making process. It makes sure that banks can instantly automate the lending process with background checks and verifications. In addition, auto decisioning instantly responds to customers after applying. Besides a user-friendly interface and other modern features, the digital lending platform offers a convenient application and decisioning process.
Digital lending platforms replace human decisions with AI/ML decision rules. This technology ensures that the process is always consistent and error-free. Pre-configured workflows and automatic decision rules make sure that the applicants are assessed in accordance with the appropriate risk limits and loan terms. As a result, no human bias or error is involved. The platforms just adheres to pre-configured rule sets to ensure the consistency of the loan origination processes and credit policies.
Comfort across Devices
Delivered mostly on smartphones, a digital lending platform can help banks reach the highest number of potential lenders. Today’s GenZ and millennials cannot live without their smartphone. All of their daily activities, including financial transactions for all their activities and they prefer doing their financial transactions on it too. They want the convenience of making transactions or applying for a loan anytime from anywhere. It’s very difficult to please. Also, they will not think twice before abandoning the loan application and moving to the next lender if they have a bad experience.
In this case, digital lending platforms act as a one-stop solution with little manual data input and fast turnaround time from loan application to money in the account. Customers should be able to move seamlessly from one device to another to complete the application forms, be it the web and mobile interfaces.
Perfect for first-time borrowers
Digital lending platforms make it easier for first-time borrowers to originate loans. Today’s consumers are comfortable with automation and smartphone for all their banking activities. The digital platform automates the entire lending cycle while offering user-friendly features and requiring very little manual input. Embedded decision rules make sure that loan applications are free from human bias or error and makes the entire experience efficient, effective, and enjoyable.
Compliance with Rules and Regulations
Most digital lendings abide by RBI’s regulations for Banks and NBFC’s for Lending. Providers of digital lending platforms are required to make their products in compliance with these regulations and help the lenders focus on their business only. Lenders also must make sure that the providers are updated with all the latest guidelines issued by the Regulators to quickly incorporate them into the digital lending platform.
Power of Analytics
Embedded with advanced analytics, a digital lending platform can help lenders track customer behaviors and understand the market trends to have a deeper insight into the lending process. In the long run, this analysis helps lenders to predict and allocate appropriate underwriting resources to accommodate seasonal demands. Lenders will also have a broad understanding of loan sources, demographics, credit tiers, and other inputs which can drive market strategy. Analytics can provide essential information about decision bottlenecks and scope for process improvements.
Improvement in Business Efficiency
Lender resources can be used to explore new opportunities while the loan process is completely automated. As time passes, digital lending platforms can help save 30 to 50% overhead costs. The traditional manual lending system was a pain for both lender and borrower. It relies on human intervention and physical interaction at every step. Customers had to make multiple trips to the banks and submit all kinds of documents, and manually fill out several forms. These forms were manually verified by the officers at the lender’s premises before final approval was given and the loan is disbursed.
This entire process can take up to weeks and be subject to human errors at every level. The digital lending platform is a paradigm shift in the leading landscape. Its advantages are too huge for banks to ignore. The digital lending platform automates the entire loan lifecycle from application to approval, offering a far superior customer experience.
Rationalization of Loan Underwriting
Digital lending platforms allow applicants to submit all information and proof them online, which eliminates the pain of paperwork and manual processes. This time saving can be leveraged to engage clients in non-digital relationship-building activities which enhances customer service top notch and ensures a human touch.
Digital lending software is used to sync data from credit bureaus and other banks to make sure that all uploaded data and documents are verified. The platform uses decision rules and underwriting algorithms to determine how risky is the loan application. By combining artificial intelligence and machine learning, the digital lending software delivers a better underwriting process than human judgment.
The Digital Lending platform has changed the way banks think about and implement their loan procurement. Banks can now deploy a fully-digital loan cycle leveraging the latest innovations. A great digital lending platform must have easy application submission, quick approvals, compliant lending processes, and the ability to continually improve process efficiency.
At KMS Solutions, we provide an all-in-one Digital Lending platform that helps banks automate the entire loan cycle.