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3 Advantages of Automating Loan Processing & Decisioning

  • by Brit Barker
  • October 25, 2022

In today’s digital-first world, lenders are striving to create a better, faster, and more frictionless experience for their members. Changing customer expectations call for new customer conveniences… like the ability to complete membership or lending applications online while receiving a decision in minutes.

Providing an outstanding digital member experience – from origination to onboarding – is at the heart of how credit unions will further their success in the immediate future. Pressure from fintechs, a fickle economy, and the rapidly changing technology landscape are driving lenders, like credit unions, to adopt new technological solutions.

In my experience, automating loan processing and decisioning is one of those solutions that can help credit unions benefit the most.

How automation helps

For credit unions, there are three advantages to implementing automated loan processing and decisioning.

The first is improved efficiency. We are always searching for ways to fund more loans and make faster decisions. What if there were a way to provide faster decisions along with higher approval rates without increasing our appetite for risk? That’s what automation helps us to achieve while simultaneously improving processes and reducing underwriting costs.

The second is accuracy. While credit unions have historically been reluctant to embrace high levels of automated decisioning, it can actually improve decision-making. In fact, we have seen AI machine learning increase approvals by up to 25% without a corresponding increase in risk.

As part of automation in processing and decisioning, AI engines can achieve 99% accuracy rates while guarding against fraud and ensuring compliance. Automated document processing has been shown to reduce human error and fraud risk – while helping credit unions provide their members with a more frictionless loan origination experience.

Automation not only means speed, but also the ability to process more loans with less points of friction. Even better, for credit unions that need to expand their network of dealer relationships, automation helps deliver faster funding.

Finally, automation can help us create the improved digital experience that our members and potential members demand, especially in auto lending. How many opportunities are lost simply because an applicant is asked for redundant information or details the lender should already know? Alternatively, how quickly are disruptors like Carvana moving to fill the gaps that tradition-bound credit unions sometimes struggle to match. Meeting and beating our competitors with new digital conveniences is one of the key challenges that credit unions face.

Putting a program in place 

Credit unions have often been late adopters when working with automation and auto decisioning. While finance apps and global banks offer cutting-edge technology, credit unions take pride in offering member service with a personal touch. But those two forces no longer need to be at odds since the next generation of automation and decision solutions include configuration capabilities designed to meet your specifications and needs.

Credit unions can use automated loan processing and decisioning to accelerate approvals in specific scenarios while creating automatic rejections for others. These configurations create flexibility to adjust programs to specific risk factors and changing economic situations. Scoring models and risk factors can always be altered, so you actually gain better control of your throughput.

Simply put, automated loan processing and decisioning create a system that assesses relevant information and data related to the applicant, allowing the lender to quickly make a positive or negative credit decision. The lending team at a credit union can set up the decision engine however it wishes and utilize the champion challenger to apply decision variable changes to a recent set of loans to determine how decisions would be rendered.  This enables the team to quickly review and deploy automation and then reap the benefits of increased efficiency and accuracy.

In the future, the models will continue to improve as the technology is refined and more data is gathered. Already, the market is seeing risk-based pricing models that can account for how various borrowers with same credit score actually can have dramatically varied default frequencies. AI models are able to parse through remarkably vast amounts of data in seconds. They can find variances that humans cannot – at least not without several months of painstaking research.

How we can help

Origence arc was created to help credit unions provide the modern experience that their members demand. That’s why we have signed a partnership with Informed.IQ to power document automation for indirect lending – creating a faster funding experience in auto financing for both dealers and lenders.

With arc OS, formerly known as Lending 360, we have partnered with Zest AI to empower credit unions with more accurate credit scoring methods and fast automated decisioning. If you’re ready to see how Origence arc and arc OS can help your credit unions accelerate their digital transformation, get in touch with us anytime.

Brit Barker, Origence’s senior vice president, enterprise solutions, is an experienced sales and product executive with 20 years of helping financial institutions improve their lending performance and exceed consumer needs. He’s recognized as an industry leader with innate talent in balancing strategic focus with operational execution. Brit is an authority on consumer, mortgage and indirect lending, with expertise in facilitating the transition of new clients into the financial lending market, and enhancing lending programs.

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