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This is no news that automation has reshaped a host of services across various industries. In the current lending market, banks and financial institutions are continually adopting automation to enhance efficiency, productivity, speed, and overall customer experience.

However, there are still high-volume banking activities where greater efficiencies can be achieved. In particular, the loan origination process by banks and credit firms could be redefined with automation to be frictionless, bringing even better outcomes. Let’s understand in detail how automation can enhance loan origination process for financial institutions as well as customers.  

Credit scoring

From income statements to past credit reports, banks use several types of financial records to assess the creditworthiness of the borrower. While this data significantly helps to gather insights into the borrower, manual operations consume a lot of time and money to complete the process. Moreover, banks still lack sufficient resources to perform accurate credit analysis, which has created a high demand for third-party services.

With the advent of automation, banks and financial firms can extract relevant financial data from multiple sources in a matter of seconds. Automated operations and machine learning methodologies can help them by accurately and efficiently tabulating financial statements of borrowers to advance the process of credit scoring.

Credit presentation and decisioning

Automation plays a significant role in pre-screening applications and assists in credit decisioning process for the decision makers. It is enabled by pre-determined decision rules that accelerates faster and more accurate loan origination process – resulting in shorter turnaround time and higher consumer satisfaction. Furthermore, it also eliminates the need for human intervention that might create chances of error and stretch the process duration.

In today’s world, a fast and accurate credit decisioning process could be a competitive edge for any financial institution. It could speed up the complete lending process and facilitate consistency in decisions.

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Credit risk management

Traditional processes suffer from a lack of accuracy and efficiency when it comes to credit risk management. With manual underwriting methods, lending firms often struggle in analyzing financial reports, data integrity – resulting in heavy losses. Automating key operations of credit risk management helps ensure that financial data and reports are subject to robust governance and control. It allows to better judge credit risk in multiple scenarios, consequently, reducing the chances of bad debts and frauds.

Conclusion

Adopting automation at all stages may present some challenges to banks. Also, it cannot be achieved overnight. Seeking help from technology experts (Fintechs) can boost up the process for banks as they have the expertize that can lead to faster adoption.   

To conclude, it is not much of a stretch to say that the landscape of lending is constantly changing. Leveraging automation, the loan origination process is moving from traditional operations to more advanced and modern ones. However, it would be interesting to see how banks and credit forms adopt automation to make their lending operations efficient and customer interactions smooth and effortless.