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3 Advantages Of Automating Loan Processing And Decisioning

Changing member expectations call for new conveniences, and new technological solutions will help credit unions further their future success.

In today’s digital-first world, lenders are striving to create a better, faster, more frictionless experience for their members. Changing customer expectations call for new customer conveniences, such as the ability to complete membership or lending applications online and receive 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.

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. Credit unions 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 your appetite for risk? That’s what automation helps achieve while simultaneously improving processes and reducing underwriting costs.

The second is accuracy. Credit unions have historically been reluctant to embrace high levels of automated decisioning, but 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 means not only 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 create the improved digital experience that 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 competitors with new digital conveniences is one of the key challenges credit unions face.

Putting A Program In Place

Credit unions have often been late adopters when working with automation and auto decisioning. Whereas 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. 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 use 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, 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, risk-based pricing models can account for how various borrowers with the same credit score 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 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.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
January 23, 2023

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