For years, community banks have differentiated themselves from their regional and national competitors by emphasizing personal service, relationship building and local expertise. But in today’s digital age, that may no longer be enough. Increasingly, tech-savvy customers want to conduct banking business, including loan applications, from start to finish without ever having to set foot in a branch. Modern lending systems — which take advantage of cloud technology, artificial intelligence (AI), robotics and other tools to automate the process — make this possible.
Automating the lending process offers many potential benefits for banks. And contrary to what you might think, embracing this technology doesn’t necessarily make customer relationships impersonal. By streamlining the lending process and reducing time-consuming manual tasks, automation can free up time for your staff to focus on building personal relationships.
Advantages of automation
Key benefits of automating the lending process include:
Improved efficiency. Many banks continue to use a hodgepodge of paper loan applications, Word and Excel documents, emails, and phone calls to shepherd a loan from application to approval to disbursement. Automated systems streamline the process by creating a single digital workflow that eliminates the need to enter data more than once. They also help route applications through the various steps in the process, and even generate necessary disclosures.
Reduced errors. By minimizing staff involvement in data entry and reporting, automated systems reduce the likelihood of mistakes.
Stronger regulatory compliance. Automation provides access to vast amounts of data, improves uniformity and reduces errors, making compliance easier and more reliable. AI tools can even prompt bank personnel when specific disclosures are required. They also can spot red flags that may signal fraud more consistently and faster than human auditors. In addition, these systems create a comprehensive audit trail for regulatory review and reduce risk by decreasing the number of platforms a bank uses.
Faster, more consistent underwriting decisions. An automated system streamlines the underwriting process and helps ensure that the bank’s underwriting standards are applied consistently. It reduces the need for time-consuming manual tasks and avoids the risk of bias inherent in a manual underwriting process.
Scalability. Automated systems are highly scalable. Unlike manual systems, which are prone to bottlenecks, automated systems can easily keep pace as transaction volumes grow. They also facilitate digital expansion into new geographic areas.
Analytical insights. By collecting and centralizing customer data, automated systems provide insights into the products and services customers use, as well as their transaction histories, demographics and preferences. This allows the bank to tailor products and services to them.
Happier employees. Automation can help banks combat the continuing skilled labor shortage. Enabling lenders to spend less time on paperwork and more time doing deals, advising customers and building relationships makes it easier to attract and retain talent. It also streamlines the process of onboarding new personnel.
Enhanced customer experience. An automated loan process can increase customer satisfaction, especially for customers who demand speed and the convenience of 24/7 access to their loan applications without the need to visit a brick-and-mortar location. It can guide borrowers through the process, pre-fill information, allow for mobile uploads of documents, generate automated reminders and enable e-signatures. This can lead to quicker decisions and funding, thereby improving the customer experience.
In addition, lending personnel spend less time on paperwork and other repetitive manual tasks. So they have more time to provide customers with personalized advice and guidance.
Next-level relationship banking
As the business world becomes increasingly digital, community banks that strive to remain competitive and customer-focused should evaluate cost-effective ways to automate their lending processes. Automation isn’t a replacement for the personalized service and relationship banking community banks are known for. Rather, it enhances lenders’ ability to build relationships by allowing them to spend more time advising customers and less time performing administrative tasks.
Sidebar: Using RPA to boost productivity
In addition to automated lending systems, many community banks use robotic process automation (RPA) to streamline various tasks outside their loan origination systems. RPAs are software tools that automate repetitive, rule-based tasks traditionally performed by people, such as:
Creating invoices. Generating accurate invoices often involves compiling backup information from multiple systems, which is a time-consuming, error-prone task when performed manually.
Opening accounts. RPA can help banks with initial account setup and know-your-customer (KYC) compliance by assisting with such tasks as extracting data, verifying documents, and screening Office of Foreign Assets Control (OFAC) and sanctions lists.
Managing documents. Manual systems are error-prone, and documents may be easily lost or misfiled. RPA can automatically route scanned documents to the appropriate recipients and file them in a centralized, readily accessible repository.
Servicing customers. RPA-powered chatbots can handle routine customer-service inquiries, such as account balances, transaction histories, loan status and password resets.
Closing accounts. RPA can automate the processing of account closure requests, including verifying customer information, processing final payments and updating account records.
These are just a few examples. RPA can be used to streamline a wide variety of financial, administrative and operational processes.
