In recent years, the pressure for banks and credit unions to enhance their lending services has grown significantly, especially with the rise of non-traditional competitors such as marketplace lenders. According to an article in American Banker, more financial institutions are planning to upgrade their Loan Origination Systems (LOS) than their core systems, with a ratio of 2 to 1. This trend highlights the importance of having an efficient and up-to-date system for managing loans.
Whether you’re looking to upgrade your current system or replace an outdated one, selecting the right LOS, such as BankPoint, is critical to improving your loan processes and staying competitive. An effective LOS not only streamlines your operations but also provides a better experience for your customers. To help you navigate the decision-making process, we’ve outlined key guidelines that will assist you in selecting an LOS that meets your institution’s needs.
Content
1. Start with the Customer in Mind
One of the most important aspects of choosing the right LOS is improving the experience for your customers. A streamlined and efficient loan origination process can significantly reduce customer frustration and dissatisfaction. Studies, such as those conducted by the Federal Reserve, have shown that many customers find long wait times and complicated loan applications a major source of dissatisfaction, especially at traditional banks.
If you want to keep your customers happy, your LOS should allow for faster credit decisions and a simpler application process. Compared to traditional banks, online lenders often provide quicker responses, making them a preferred choice for many borrowers. The key here is reducing friction in the process—speed and ease of use matter.
Make sure your system supports the unique needs of your customers. For instance, consumer lending, small business lending, and commercial lending each require different approaches and workflows. An ideal LOS should have the flexibility to handle all types of loan requests with a standardized process that ensures consistency and minimizes redundancies. Additionally, it should leverage customer data to enhance decision-making and provide a better understanding of borrower profiles.
2. Plan for Today and Tomorrow
When choosing an LOS, it’s essential to consider both your current needs and the long-term growth of your business. Financial institutions must anticipate future changes in the lending market, such as evolving customer expectations and regulatory requirements. Your system should be able to adapt to these changes and scale as needed.
For example, if your bank is expanding into new markets or adding new types of loans, your LOS should be capable of handling these new business areas. You should also think about your institution’s appetite for risk and how the LOS can help you manage and mitigate that risk.
The LOS should support both manual and automated decision-making. If you currently rely on manual underwriting, an LOS with auto-decisioning capabilities can streamline the process and reduce errors. Over time, this will help improve efficiency and reduce costs, enabling your staff to focus on more valuable tasks, such as business development and relationship management.
3. Document and Understand Your Loan Processes
To ensure that the new LOS is a good fit for your institution, it’s important to first document and thoroughly understand your current loan origination processes. Without clear and well-documented processes, you risk having your LOS dictate how your loans are handled, which may not align with your needs.
Take the time to review your current workflows, from loan application to approval, underwriting, and final documentation. Identify areas where the process could be more efficient or where automation could save time. This will help you choose an LOS that complements and enhances your current practices, rather than forcing you to adopt a system that doesn’t fit well.
4. Review Your Data and Analytics Needs
In today’s competitive landscape, data is key. Your LOS should provide powerful data analytics tools that allow you to make informed decisions about your loan portfolio. It’s not enough to simply collect data—your LOS should enable you to analyze and act on that data effectively.
Consider what types of reports and analytics are essential for your institution. Customizable dashboards that allow you to track loan performance, identify high-risk accounts, and spot opportunities for growth are crucial for making strategic decisions. A comprehensive LOS should integrate with your core banking systems to pull relevant data and provide you with a 360-degree view of your customers and loan portfolio.
5. Plan for Integration with Existing Systems
A successful LOS implementation involves more than just installing new software—it requires seamless integration with your existing systems. If your institution uses various platforms for different business functions, it’s important that your new LOS can integrate smoothly with these systems. This integration will ensure that your institution can access all relevant data in one place, reducing the risk of errors and improving workflow efficiency.
Cloud-based LOS solutions offer the added benefit of scalability and flexibility. They allow for real-time updates, can be accessed from anywhere, and enable easier collaboration across departments. This can be particularly beneficial for institutions with remote workers or teams that need access to the system while on the go.
Risk Management and Loan Monitoring
An effective LOS should also support your institution’s risk management strategies. It should integrate with your risk management processes, making it easier to identify high-risk loans and proactively address potential issues before they become serious problems. Your LOS should allow you to continuously monitor loan performance, review creditworthiness, and make adjustments as needed.
For example, an LOS that automatically flags underperforming loans can help your team take timely action, preventing delinquency or defaults. Additionally, the LOS should provide comprehensive reporting tools that allow you to evaluate your loan portfolio’s risk and performance in real time.
6. Consider the Benefits of Cloud-Based Infrastructure
In recent years, cloud-based technology has become a game-changer for many industries, including banking. A cloud-based LOS offers a number of benefits, such as lower maintenance costs, easier scalability, and the ability to integrate with a wide range of other systems.
By using a cloud-based solution, your financial institution can stay ahead of the curve by quickly adopting new technologies and features as they become available. It also ensures that your systems are always up to date and compliant with the latest security standards.
Conclusion
Choosing the right loan origination system is a crucial decision that can impact your institution’s efficiency, profitability, and customer satisfaction. By keeping your customers’ needs in mind, documenting your processes, and evaluating your data and integration requirements, you can select an LOS that not only meets your current needs but also prepares you for the future.
As you evaluate potential LOS providers, remember that a complete, end-to-end solution is key. Look for a system that can handle all aspects of your loan origination process, from application to approval to documentation. A well-chosen LOS will allow you to optimize your workflows, manage risk more effectively, and enhance the overall customer experience, giving you a competitive advantage in the lending market.
By following these guidelines, you can ensure that your institution is equipped with the right tools to succeed in an increasingly competitive and fast-changing financial landscape.
