Q2 has helped scores of clients transform their lending business – this is what we’ve learned along the way.

The lending sector is changing rapidly, for everyone. Taking more than a few hours or even minutes to deliver loans to customers isn’t a viable business model anymore. But neither is mainlining the digital and data agendas without due regard to risk. Most players in the lending game need to figure out how they can implement digital lending quickly, and responsibly.

The transformation from where you are now, to a tech-driven, intuitive, seamless, and safe lending experience is hard. Q2 has worked on hundreds of projects with organisations around the world to help them transform their business models, products and services, and introduce technology to improve the customer experience. And we know that the number one obstacle to success isn’t failure to understand the benefit of technology, or the complexity it can bring of the process, it’s fear.

It can certainly be a steep learning curve for our clients, but we’ve learned, and we know how to handle everything from coding to a crisis of confidence. So if you’re looking to change the way you onboard borrowers and lend money, then you’re reading the right blog.

Focus on the user’s application and onboarding experience

A successful lending model has the customer at its heart – if anything, the pandemic has absolutely amplified that requirement. Many governments have lifted restrictions on pre-loan checks, but that’s gifted banks with another problem – heightened risk of fraud. Not great for customers, and it certainly doesn't make the proposition of digitising the lending process any more appealing. But it can be managed simply - shifting to a tech-led lending system can accelerate approval of cash for customers without losing any of the scrutiny you’d normally apply.

So before you start to change how you lend, think carefully about what your customer needs. Talk to them about what they want from the lending process, and what they find difficult about the way it is now. Ask them about their fears. You might be surprised at the small changes you can make to technology and processes that directly meet their needs.

As Darpan Saini, our SVP of Product and Engineering, says, “Using technology won’t make you more impersonal, it will actually give you the time to be more insightful, more personable.” But in order to achieve that, you have to map out the entire customer journey from first contact to repayment and beyond and use what you find to reimagine how you deliver.

Go easy on the data at first

It’s common for transformation programmes to worship at the shrine of data. But we’d urge caution here. Not all data is equally useful. When you first begin to automate and train your models, use reliable data that you already collect. Work out how multiple datapoints can work together to deliver deeper insights.

Also, keep your infrastructure open. Test your models against old decisions and investigate whether discrepancies in results are a good thing, or not. Once you’re confident your automation delivers robust and accurate results, then you can leverage new datapoints to enhance decision-making.

Rely on your relationship managers

Transformation to digital lending is a challenge no matter what your culture is. And it pays not to alienate your talent. A strong loan origination transformation starts with automating the simple tasks with an eye to freeing up your relationship managers to handle complex or exception applications. Digitisation doesn’t render your staff obsolete – it enables them to work better, and to cross-sell more. But you have to bring them on board from the start.

As one COO of a tier one asset finance company said: “Unease is normal, but gain your relationship managers’ trust, make them a part of the transformation process early, listen to their feedback, and they will understand that their jobs are being augmented, not eradicated.”

Cross the divide and remove silos forever

Building a market-leading digital loan origination process requires staff from key teams, such as credit and underwriting to work together. This is the only way to ensure the needs of the customer are balanced with the revenue objectives of the business and the risk appetite of the bank as a whole. Blended team efforts allow for rapid iteration and testing, and help build confidence across all functions in the organisation.

Know the way and show the way

Making the leap to digital lending is hugely complicated. Loan origination touches every part of the business, and typically no one has complete ownership or oversight of the process. You need a strong leader to orchestrate front office, IT, risk, operations - everyone - so you can build a process that really flows. Silos in the organisation – and the tension that can build between them - need to disappear. A leader who can prioritise where resources go, ask challenging questions, and constantly make the cultural case for digitisation, is essential to transformation and what comes beyond it.

 “Change management requires heavy lifting,” says Darpan Saini. “And that’s most effectively accomplished when it’s managed from the top. If you leave transformation in the hands of system operators, it usually results in them digitally replicating the systems they already know. You have to implement at a strategic as well as a functional level.” 

These tips will help as you consider digital lending transformation and what may lay ahead.

Learn more about Q2 and our approach to digital lending by visiting our Beyond Transformation web site.


Written by Q2