How to Achieve Scale and Visibility in Loan Acquisition Programs

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Many banks and credit unions are seeing a shift in behavior as more consumers turn to fintechs and point-of-sale lenders, instead of seeking these loans directly from a financial institution. Credit unions can use this as an opportunity to solve two important business challenges – first, how to deploy excess liquidity, and second, how to continue to grow the membership base and loans by partnering with fintech companies and to indirect lenders to generate new loans to members.

Lending partnership programs can be a seemingly limitless engine of growth or a compliance and resource nightmare. Below are some recommendations for creating a well-oiled loan growth engine in your credit union.

Choose the right fintech partner(s). When venturing into acquiring loans, a credit union must first choose the right partner that matches its members, credit and risk tolerance. Fintech companies can help the credit union achieve digital membership goals and lending goals, but due diligence with these partners is essential. Non-bank providers can offer financing options directly in retail or point-of-sale feeds for their customers, but they need the help of a traditional financial institution, such as a credit union, to manage the loan after the grant. The partner you select should be aligned with credit union values ​​in several areas, including member experience, credit quality, compliance, and information security. In most cases, the loan program partner will handle the initial application, verification and funding. The credit union has entered into agreements to initiate and, in some cases, manage loans based on its risk and membership profile. These borrowers then become new members, broadening the credit union’s membership base and potentially increasing demand for other services.

Build for scale from the start. These programs have historically lacked scalability due to inefficient manual processes and a lack of visibility into loan performance. If partner and cashier exchange spreadsheets, .pdf and .zip files, they create a need to hire more staff for manual processing, booking and quality control of loans as they go along of their origin. Aggregating and understanding data becomes a monumental task as the volume of loans increases. A disjointed process with siled data also means there is no visibility into the process for the credit union and program goals cannot be closely monitored. Quality control and compliance become an afterthought that can only be discovered much later as loan season progresses.

Remove bottlenecks and silos with automation. If the program is built correctly from the start, it should be easy to visualize, analyze and report on the loan program – that way you never lose control and oversight of the process. Organize data entry and documents in an easy to use dashboard. Loans should be automatically scanned for missing data and to ensure they match the credit union’s risk profile. Automate the digital opening of memberships or loans and integrate quality checks – this should include checks for credit quality, data quality and alignment with underwriting and agreement stipulations.

Automate quality control completely and the right way, the first time. This is where many financial institutions stumble. The most common options are in-house development of a data mapping solution, a custom-developed outsourced solution that complements data transfer and operation of a SaaS process automation platform. Internal development programs often compete for resources, and the skills needed to create a fully automated solution that can verify completeness and quality before the loan is added to the credit union’s books and records may not be be available internally. Custom outsourced solutions can be expensive, don’t provide the necessary workflows to handle exceptions, and take too long to implement. But SaaS process automation platforms provide the ability to not only import the data, but also analyze the completeness and accuracy of the loan file, take samples for underwriting review based on a risk-based approach and generate workflows that route and track loans for manual review only. when needed, while the manual steps of booking and onboarding loans into your system for creating, maintaining and reporting members are automatically done.

Loan Acquisition Automation Best Practices

  • Build a program where members and loans are scanned and opened digitally in your core.
  • The solution must upload loan documents directly to the core document management system.
  • Be proactive in reviewing membership and credit criteria before accepting loans from your partners.
  • Monitor performance and create risk review criteria to ensure unwanted loans and data errors do not affect loan program success.

A well-built program should be easy to scale without increasing risk or adding resources. If done correctly, you should have better visibility into loan quality as well as real-time reporting for long-term decision making. This replicable framework can be used with other fintechs or indirect lending channels providing a third-party origin, allowing the credit union to continue to grow its membership base and revenue.

Christina Evans Christina Evans

Christina Evans is Director of Compliance Products and Solutions Consultant at FINBOA, Inc., a Houston-based provider of intelligent process automation solutions for banks and credit unions.

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