13 Benefits of Loan Automation for Financial Institutions

If you run a financial institution, you know just how labor-intensive the loan origination process can be. In turn, you may be looking for a way to make it more efficient. If so, automation is one of the most powerful tools you have at your disposal.

According to McKinsey, around 45% of business activities can be automated. And lending-specific automations can streamline the loan application, origination, approval, and servicing processes by eliminating the need for human intervention on repetitive tasks.

So, what are the benefits of loan origination automation? Keep reading to find out the top 13 advantages of embracing automation at your financial institution.

The Importance of Loan Automation in Today’s Market

By 2030, the loan market is projected to grow significantly. If you want to capitalize on this growth, you need to hone your efficiencies and sharpen your competitive advantage. Look for a modern loan origination software for banks, credit unions, and other institutions that unlock endless possibilities to scale your lending services.

Automation can also help you appeal to the growing swath of Millennial and Gen Z borrowers. These borrowers have different needs, preferences, and priorities than their older counterparts. As digital natives who are accustomed to immediate gratification, they want to apply for loans online and receive swift responses. At the same time, they still appreciate personalized customer service.

For these reasons, loan automation is a must in today’s market. It can help you meet borrowers’ expectations and enhance your efficiencies, resulting in greater revenue down the line.

13 Benefits of Automation for Loan Origination

So, why is automation such a game-changer for loan origination? By letting technology take care of tasks that don’t require a human touch, loan origination automation can:

1. Streamline your application process – Loan automation can streamline your origination process at every stage, starting with your applications. That’s because loan origination software facilitates online applications, and digital applications don’t have the same data-entry burdens as paper ones.
   
   Digital applications are also more convenient for your borrowers—they can fill them out from the comfort of their own homes. Better yet, you can save, store, and reference their online application data in the future, ensuring you don’t bother them with repeat requests for the same information.
   
2. Speed up your approval times – Once your loan origination system receives applicants’ submission data, it can process it much faster than your employees. This software simply needs to compare application data to your preset credit, debt, and income parameters. Not only can this reduce your employees’ workload, but it can satisfy your borrowers’ desire for faster approvals.
   
3. Increase revenue – By helping you close more loans in less time, loan automation can boost your revenue. For this reason alone, loan origination software can pay for itself in a matter of months. You can then reinvest more into other business optimization efforts.
   
4. Save time – Beyond loan approvals, automation can save time in a multitude of ways. It can reduce the time required to enter data in your software systems, pull applicants’ credit reports, conduct income and employment verifications, and communicate progress to dealers. By digitizing these processes, loan automation can shave hours to days off of your employees’ weekly workloads.
   
5. Reduce errors – Another benefit of automation is that it mitigates the risk of manual errors. After all, even the best loan officers misspell a borrower’s last name or mistype a Social Security number from time to time. While unintentional, these types of mistakes during document processing can have time-consuming and costly repercussions. In contrast, automated software never gets tired or has a bad day—it can complete repetitive tasks the same way every time, resulting in fewer errors.
   
6. Enhance operational consistency – Ensuring a consistent loan origination system workflow isn’t just important for accuracy’s sake. Banks and credit unions must be fair and consistent to ensure equal treatment of borrowers and to comply with relevant regulations.
   
7. Fortify your risk management – Curating a healthy loan portfolio ultimately comes down to the quality of your risk management. Automation can help you identify red flags in borrowers’ applications that your loan officers may not notice. As a result, you can have more confidence in your lending decisions and reduce the chances that you face unexpected loan fallout, delinquencies, or repurchase demands from investors.
   
8. Reduce costs – Most businesses are always looking for ways to cut costs. If you’re one of them, embracing automation is a surefire way to reduce your variable expenses. Automation can cut costs by saving time, making it so you don’t have to hire as many employees or waste time addressing avoidable errors.
   
9. Free up employees’ time to focus on higher-value tasks – When it comes to automation, a common fear people have is that it will eliminate the need for human employees. However, automation can actually enhance the human element at your business.

Loan automation gives your employees more time to concentrate their efforts where they’ll have the greatest impact, leading to less burnout, higher productivity, and stronger job satisfaction. For example, as technology takes care of tedious tasks in the background, your employees can tend to your borrowers and strategize ways to optimize your operations.

10. Improve the customer experience – One of the most valuable areas for your team to focus their newfound time and attention is on customer service. Satisfying your borrowers is crucial if you want them to return to you for future loans.
    
    Unfortunately, the borrower retention rate for lenders is dismally low—less than 20% of lenders retain their customers for repeat business. By providing your borrowers with an exceptional lending experience, you can boost your retention rate and attract more referrals.

11. Facilitate cost-efficient growth – As interest rates and consumer demand shift, so does the loan market. For instance, in the past few years, the mortgage loan market has experienced record volatility.
    
    During times of prosperity and growth, you may be tempted to increase your workforce to better address increasing demands. Unfortunately, doing so may simply set you up for layoffs when the market inevitably takes a turn.
    
    Loan automation can mitigate the need to right-size your workforce by making technology one of your hardest-working employees. As automation breezes through repetitive tasks at a record rate, your existing team can be more productive in other areas, enabling you to scale up your operations without increasing your staff.
    
12. Unlock data-driven insights – Implementing loan automation software can benefit your business in a variety of ways. However, in such a competitive industry, there is always more room for improvement. You can uncover inefficiencies in your workflows by analyzing your loan origination data regularly. Once you’ve identified bottlenecks, you can develop a strategy to resolve them and ultimately increase your bottom line even more.
    
13. Drive efficiencies – Thanks to all of the benefits we’ve discussed so far, loan automation can have an unparalleled impact on your business efficiency. An efficient loan origination process can set you apart from your competitors and help you remain profitable, no matter what happens in the loan market.
    

Now that you understand these 13 benefits of loan automation, you may be wondering what automated solutions are currently available. At Fuse, our innovative loan origination software can automate many aspects of the lending process, enabling your team to reap these rewards.

What are the Disadvantages of Manual Loan Origination?

While it’s clear that automating the loan origination process offers worthwhile benefits, some lenders may still be reluctant to embrace new technology. Unfortunately, lagging on loan automation comes at a steep cost.

Compared to automation, manual loan origination is significantly more:

• Time-consuming
• Tedious
• Inefficient
• Error-prone
• Risky
• Expensive

For these reasons, choosing to forgo loan automation can set you back, especially as an increasing portion of banks and credit unions automate their operations. Thus, savvy financial institutions should view loan automation as a necessity if they want to stay competitive.

The Future of Loan Automation in Financial Institutions

In the future, automation is only going to become more integral to financial institutions. That’s why implementing it sooner than later can expedite your success.

Just like many other transformative technologies, automation is advancing at a rapid pace. Future loan automation software will likely leverage artificial intelligence (AI) and machine learning to a greater degree. These two technologies can analyze large amounts of variables at once and pinpoint patterns within them, allowing you to make accurate lending decisions at a record pace.

Increase Efficiencies With Fuse

Loan automation can help you mold your bank or credit union into an efficient lending machine. If you’re eager to reap the benefits of automation, Fuse can help you get started.

Our automated loan origination software is customizable, scalable, and secure. You can adjust it as needed to suit your unique lending process. Thanks to our ever-expanding list of API integrations, Fuse can be incorporated into your existing tech stack with ease. Best of all, you can learn how to use this state-of-the-art bank and credit union lending software in one day.

Want to find out how Fuse’s system can help you close more loans? Request a demo of our loan origination software for lending teams today.  

Sources:

McKinsey. Four fundamentals of workplace automation.

https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/four-fundamentals-of-workplace-automation#:~:text=The%20bottom%20line%20is%20that,US%20economy%20could%20be%20automated.

Market Watch. Commercial Lending Market Future Statistics and Probability by 2030.

https://www.marketwatch.com/press-release/commercial-lending-market-future-statistics-and-probability-by-2030-2023-05-16

ICE Mortgage Technology. ICE Mortgage Technology’s 2023 Borrower Insights Survey indicates caution to buy and sell, but lender opportunities remain.

https://www.icemortgagetechnology.com/blog/updates-announcements/ice-mortgage-technology-s-2023-borrower-insights-survey-indicates-caution-to-buy-and-sell-but-lender-opportunities-remain

Mortgage Professional. Cracking the code – fintech firm’s secret revealed.

https://www.mpamag.com/us/specialty/technology/cracking-the-code-fintech-firms-secret-revealed/398297