While the pandemic subsides, digital lending modernization will become the new normal for financial industries. One of the most crucial things is that they must adapt and develop their digital platforms accordingly to respond to customers who increasingly avoid in-person or phone contact and prefer to use mobile and online channels for loan services. Digital lending platforms align extremely well with IDC’s (International Data Corporation) 3rd Platform model for business strategy and investment. In this model, core technologies of cloud, big data/analytics, mobility, and social media enable the financial industries to manage relationships and conduct business transactions more successfully.
As per IDC’s Worldwide Banking IT Spending Guide, tech spending on loan origination was $7.3 billion, or 44%, of overall loan IT spending in 2021, growing to $9.7 billion in 2025. The International Data Corporation Industry Spending Guide also found that 3rd Platform technologies will be the largest area of technology investment by the banking industry in 2022. Also, cloud and mobility will account for at least 30% of spend intent. Financial Industries will devote significant technology spending around digital lending in areas including credit decisioning, fraud management, process automation, and customer experience. Financial Industries will find more revenue opportunities and expand customer engagement as they invest in technology solutions to modernize their loan origination process. For instance, cloud computing brings manageable costs, minimal set-up, and scalable growth for lending platforms. For credit decisioning as well as fraud management measures, big data and analytics use machine learning algorithms. Mobile device usage has grown into a ubiquitous way of doing business for B2B segments.
Various steps in the loan origination process are highly labor intensive for financial institutions, as well as time consuming for loan applicants. All of these include data collection, borrower authentication and verification, credit decisioning, and regulatory compliance. At times, borrowers can be an impatient bunch when it comes to initiating and waiting on loan applications. When seeking much-needed funds, time and user interface are key factors. A lot of financial institutions (FIs) have lagged their fintech competitors in the digitization of key banking business lines such as lending. At present, financial industries have a range of technology solutions as they play catch-up in the lending market to both consumers and businesses alike. A key enablement for the financial industries to step up their digitization game not only to improve their lending operations, but also to enhance their customers’ experience is loan origination software.
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