Consumer Lending Must Go Digital

Thousands of articles over the past decade likely lead with this sentence: "Digital transformation is here to stay." No industry has been immune, though some have been slower to transform and adapt than others — including the banking industry. 

Consumers have been quick to adapt and adopt digital technologies in their everyday lives, which means businesses across every industry need to keep pace. The pandemic also accelerated the need to work with more agility and flexibility as work and life grew increasingly remote and dispersed. Simply put, to keep business moving, companies must go digital. 

What does this mean for consumer lending? It's time to simplify the loan process and provide the experiences customers now expect. Let's explore how all types of lenders, from auto to home to student to personal lending, can make the shift to digital consumer lending. 

From in-branch lending to digital consumer lending

For generations, customers looking for a consumer loan headed into a bank's local branch to speak directly with a loan officer. They'd discuss loan needs and determine the financial documents required to qualify a borrower for a loan. 

With many details spared in between, the entire process is very manual, paper-based, and comparatively archaic to the ways most consumers live out their now digital-first lives.

U.S. consumer loans hit a record in 2021, driven by digital-first lending options. To keep pace with this momentum, it's in the best interest of every financial institution to provide capabilities to evaluate, approve, and secure loans through digital processes. However, while research from the Digital Banking Report in 2020 shows 85% of financial institutions allowed consumers to apply for a loan online, only 66% allowed the entire loan process to be completed online. Even fewer (46%) allowed end-to-end loan application completion on a mobile device. 

Let's look at the benefits financial institutions can see by allowing end-to-end digital consumer lending: 

Improved customer experience 

Any new digital process is a step toward innovation in the right direction. However, a hybrid loan process can feel disjointed and clunky. A seamless, end-to-end digital loan process enables quicker, more consistent decisions and offers more flexibility and continuity. 

Application process optimizations

Business as usual doesn't always mean business done best. Automating loans allows financial institutions to identify gaps in their existing loan processes and optimize the entire lending experience. 

Reduced operational costs 

Digital lending frees up time working on in-branch loan applications and reduces paper-based costs, resulting in lower overhead. Lenders can spend more time finding new borrowers and loan opportunities and minimize time spent at loan closings, resulting in increased profit margins.

Innovations to support digital consumer lending 

Despite consensus on the need to increase the automation and digitization of the online lending process, many legacy financial institutions are still lagging. Most institutions that are making innovations aren't looking at the entire experience — instead, they're simply offering one-off digital steps or replicating existing processes in mobile apps. 

A future-focused approach to digital consumer lending requires innovations to the lending process. Here's a look at some technologies and tools that will help borrowers complete the entire loan process — from document uploads to underwriting to notarization — digitally and remotely. 

Online applications

Moving the entire loan application process online accomplishes a few things: it makes it easier and more accessible for potential borrowers to start an application from anywhere, reduces manual errors by using required fields to ensure every application comes in with the necessary information, and uses encryption to help protect the borrower's information.

In-app or online messaging 

Grabbing quick clarification on a question about your application can be quick and easy when it's possible to ask questions right where the application lives. In-app or online messaging speeds up slower communication channels, which, in turn, speeds up the entire application process.

eSignatures

Ink-based or wet signatures feel very official — but they're no more efficient or secure than their digital counterparts. Adopting eSignatures as part of the loan process cuts down on the volume of in-branch closing appointments, which makes the entire loan closing process quicker.

Online notarization 

Using an online notarization platform such as Notarize, borrowers can sign and legally get documents notarized via computer, tablet, or any device with a camera and audio. The benefits to online notarization are twofold: Customers get the convenience of a fully-digital experience, while lenders can have a quicker transaction turnaround time, enabling them to complete more transactions.

Digital consumer lending is on the rise, and improving the digital lending process will help speed up credit decisions, get customers cash sooner, lower costs, and improve decision-making.