Beyond the fact that many institutions are decades — or even centuries — old, with long-lasting customer relationships and brand awareness, traditional financial institutions also hold key data on their business customers that is vital to their underwriting and decision making.

According to Elena Ionenko, co-founder and chief operating officer of loan Software-as-a-Service provider TurnKey Lender, this is one area in which banks have a leg up on their FinTech rivals.

“Even today, FinTechs and non-bank lenders who offer different business loans online, in many cases, still process applications and make decisions manually,” she told PYMNTS in a recent interview. “In order to digitize the loan origination process for commercial lending, you need to build specific credit scoring models, which can only be built if you have data.”

With corporate customers large and small now demanding speed and efficiency throughout the loan lifecycle — from online application, to decisioning, through to actually receiving funds and repaying the loan — the opportunities that traditional financial institutions (FIs) have to automate and accelerate digital commercial lending workflows is vast thanks to that valuable data.

However, as Ionenko explained, recent evolutions in the business lending landscape have once again introduced pressure on banks to up their game.

A PPP Catastrophe

Last year’s Paycheck Protection Program (PPP) initiative offered small and medium-sized businesses (SMBs) a desperately-needed financial lifeline. But an overwhelming surge in demand painfully exposed traditional banks’ biggest shortcomings in business lending.

Confusion around which forms were required for banks to receive an application, processing hiccups, misinformation and allegations that financial institutions favored existing customers over new SMB applicants all raised doubts over traditional FIs’ ability to operate as agile, digital-first lenders in today’s economy.

FinTechs, on the other hand, built on a digital-first foundation, found their footing amid the PPP deluge.

“In many cases, this program was very efficiently handled by FinTechs and online lenders who already had everything in place to analyze the application forms and make decisions much quicker than banks,” said Ionenko.

Due to the framework of the PPP initiative, there were relatively loose requirements that small businesses had to meet in order to qualify for funding, meaning FinTechs that lacked troves of data on business customers could still easily underwrite and process PPP loans.

Amid another round of government aid for small businesses, however, traditional financial institutions are better positioned to address demand. Lenders may not be expecting the kind of dramatic race for financing that the market saw in 2020, while legacy banks have also had the opportunity to upgrade back-office infrastructure and address the pain points exposed as a result of mishaps in the first round of PPP funding.

The environment created an even greater opportunity for banks to drive value by turning to third-party technology and Software-as-a-Service vendors, which, as Ionenko explained, can help FIs digitize and automate without forcing them to sacrifice control over risk exposure and credit policies.

Embedded Finance Shifts The Competition

Traditional financial institutions continue to take a page out of FinTechs’ book to prioritize automation and digitization in their lending operations, but the PPP initiative proved that banks still have a long way to go.

Increasingly, FIs are embracing FinTech partnerships, integrations and acquisitions to fast-track their loan modernization efforts. As that push intensifies, there are other emerging shifts in the commercial lending space that could further challenge banks’ competitive position.

One of the most prominent, said Ionenko, is the rise of embedded finance, particularly in the B2B economy, in which manufacturers are integrating their own financing services to their business customers in order to offer an end-to-end, holistic experience for the buyer.

“They bring this technology in-house to offer better financing terms to their customers, to make payment collection easier, and to just built a better relationship with customers,” she said. “They don’t want to send customers somewhere else for financing.”

As this market trend percolates, banks will continue to explore opportunities to develop more attractive commercial lending experiences. The landscape is vast, and as financial institutions implement the lessons learned from PPP financing missteps, they will be in a favorable position to broaden their digitization efforts into other areas of commercial finance as demand creeps up.

From trade finance, to invoice financing, to working capital loans, many businesses will be searching for supplemental funding when government aid isn’t enough, noted Ionenko. These are prime areas in which banks can dig deeper into digitization once they’ve mastered PPP automation.

“With this first step, they’ll gain confidence and understand how the technology works,” she said. “They’ll see how it can be built into their existing infrastructure. It’s a good first step toward broader digitization of their commercial lending operations.”

Read the full interview on Pymnts.

The traditional approach to loan-portfolio management puts collections and overall performance on one side, and origination on the other, with decisions that should be closely coordinated made by separate departments, often deployed across distinct software systems.

But that’s changing as senior managers work to strengthen ties between departments and advances in artificial intelligence allow for more nuanced — and more inclusive — procedures for vetting would-be borrowers.

Putting origination on an equal footing with other parts of loan management does more than provide holistic overviews. It puts extra resources into gatekeeping, providing a crucial first step in credit-risk evaluation and fraud detection, a must-have for overall portfolio health.

It also equips lenders to compete in today’s tough economic environment, a byproduct of business shutdowns, workplace furloughs and the general public’s hesitancy to congregate in a pandemic. In this context, it’s vital that alternative data inputs be uniformly formatted, easy to interpret, and available as an aid to decision making.

Converting such data into a scoring model requires advanced artificial-intelligence tools and processes, tons of historical data, and years of hands-on experience. But AI-derived credit scoring is vastly more accurate than traditional approaches — which hinge on credit-bureau scores and application responses — and provides lenders with the confidence they’re getting a fuller picture of applicants and approving better-performing loan, even in hard times.

The result? More good loans and better portfolio performance.

Meanwhile, there are real-world consequences to sticking with outmoded scoring models. Because old-line lenders aren’t usually able to change underwriting standards without accessing flexible, easy-to-configure and easy-to-deploy technology, it’s likely banks will experience a new wave of non-performing loans in the next year, according to industry consensus.

Read full article of Forbes or schedule a live TurnKey Lender demo today.

Point-of-sale (POS) financing was at the forefront of a retail revolution well before the novel coronavirus swooped down to disrupt business plans and household budgets around the world earlier this year. Now, with the additional spur of the pandemic, retailers are increasingly eager to reduce sales friction and attract customers by providing installment plans to fund purchases.

Businesses considering this model — in part, a digitized throwback to purchasing habits in vogue before credit cards became big in the 1970s — should first consider how best to provide credit at cash registers, real and virtual.

In the U.S., POS financing — which helps buyers finance specific purchases or spend up to pre-defined amounts with a specific retailer, typically repayable in installments —  already surpasses $100 billion a year. It’s fueled by five principal factors:

1. Convenience: Credit application occurs before the actual sale, either at the register, via a mobile device or as a prelude to self-directed online purchases.
2. Fintech innovation: Lending-tech makers have improved credit origination and processing with artificial intelligence and dynamic scoring models, in addition to automated administrative functionality.
3. Broadening acceptance: Consumers and retailers are more aware of POS financing options, especially for large- and medium-ticket items.
4. Disenchantment with credit cards: Younger consumers, many of them struggling to pay down student loans, view credit cards with more suspicion and hostility than their elders.
5. Covid-19: Broad-based shutdowns have slowed global business activity, inspiring some retailers to offer customers more purchasing options.

Though goaded now by an acute public health crisis, POS lending was on its way to mainstream acceptance among consumers and merchants alike. This trend is exemplified by Walmart’s engagement, starting last year, with installment financier Affirm.

Third-party providers for a hands-off approach to POS financing

U.S. retail purchases under POS arrangements grew in value from $49 billion in 2015 to $94 billion in 2018, representing a compound annual growth rate of 24%, according to McKinsey & Company. In its two-year-old take on the POS-financing market, the consultancy predicted that U.S. POS lending would account for $162 billion by 2022, a further CAGR of about 20%. Globally, this market may already have topped $400 billion in the run-up to the pandemic, according to other industry sources.

Retailers keen to offer installment financing to their customers at the point of purchase must make an important decision around implementation. Should they work with a third-party lender or engage a white-label in-house option provided by a lending-technology specialist? The answer can, and should, differ from retailer to retailer in accordance with a careful assessment of business needs and priorities.

Among the advantages of working with a third-party lender are:

• No waiting for the cash equivalent of the purchase amount. The loan settlement is between the consumer and the third party, with the retailer now largely out of the loop and entirely off the hook.
• The ability to remain blissfully ignorant of credit underwriting.
• The absence of credit risk.

Read the full article on Forbes:

Options For Retailers Considering Point-Of-Sale Financing To Win And Keep Customers

Of course, banking isn’t the only case in point. People held online business meetings before the pandemic, but they’ve been doing it much more since — with online-video technology becoming a part of our personal lives for staying connected with family and friends. Online grocery shopping has been around since the mid-1990s, but it has taken on new importance in recent months, as topics like supply chains and logistics have become the stuff of daily news coverage.

Read the full article on the RePay blog.

It’s not clear whether Congress will trigger an additional round of stimulus to counter the economic effects of the novel coronavirus pandemic; stimulus that has included government-guaranteed lending to businesses. What is clear, according to definitive new findings, is that the US economy was already in recession a month before a contentious and patchwork approach to “social distancing” got going in March.

As a result, lenders must reconsider how they assess business-loan applicants’ ability to honor the terms of the loan.

Another thing that seems likely is that businesses of all sizes in every state, district, and territory will be looking for loans before and after the stimulus spigot is finally wrenched shut. Many of these enterprises will be seeking help to get them through a recession exacerbated by:

● A contagion that may not have run its course

● The need for ongoing social-distancing measures that can impede business recovery, such as less restaurant seating, and expensive new workplace configurations

● Truncated consumer spending and other recession-related woes

● The usual uncertainty that takes hold in presidential election years

In this environment, many lenders will be making credit decisions based on traditional inputs that aren’t adequate to these times. In a macro view, applying old-school analysis to new market conditions could curtail lending and stall economic activity. For lenders, it could mean losing out on opportunities to make well-performing loans.

Read the full article on Forbes: How To Approach Business Creditworthiness Assessment During A Crisis-Fueled Recession

With the novel coronavirus pandemic disrupting economies around the world, the importance of credit as a tool for rebuilding has come into sharp relief — as has the need for alternative scoring for borrowers.

In the U.S. right now, lending activity is centered on businesses, largely with a view to maintaining worker headcount through the Paycheck Protection Program and other initiatives run by the federal government’s Small Business Administration. Uniquely, this government-backed lending is triggered not by creditworthiness, but by a combination of need and the borrower’s ability to find a traditional lender willing to administer the low-interest loan.

As co-founder of a company specializing in automation technology that works with traditional and alternative credit scoring providers, I’m reminded that right now that there are no analogous measures in place to grease the wheels of consumer lending, though a full economic recovery is unlikely without such a revival.

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Launching and managing a lending business can be quite an undertaking. But there are plenty of ways to make it easier. A comprehensive and intelligent technology stack should be your first step when it comes to building a successful and productive loan operation. It could prove to be one of your most important decisions.

Back in 2015, a McKinsey study found that 45% of human labor could be automated, which would save about $2 trillion in operational costs each year just in the United States. And the percentage of work that can be delegated to intelligent software keeps on growing. 

Banks and other traditional lenders used to ignore innovation, because it was out of their comfort zone. That mindset has changed as alternative lenders and FinTech startups start to conquer the lending market. The customers that had been loyal to brick-and-mortar banks for generations, started switching to online lenders due to their convenience, speed, and personalization. Not to mention cheaper credit products due to lower risk and expenses. And one of the keys to the explosion in online lending is all the benefits gained through digital transformation and innovative technology. 

That’s not to say that banks can’t replicate these same technology-driven systems and processes. They are just slower to adjust because of the bureaucracy. But the trend we see is that more and more banks come to TurnKey Lender in search of a ready-made or custom platform that supports superior decisioning, origination, servicing, and collections. 

They could, of course, create their own solutions. But it’s not enough to automate old legacy processes as a one-off exercise. To stay competitive, lenders have got to keep their finger on the pulse of the industry, and constantly upgrade their lending software. This leaves one truly viable choice – an all-in-one, intelligent lending automation solution that addresses all of their needs from a single interface. The TurnKey Lender platform is the ideal choice.

Here’s a sneak peek at the top five processes that TurnKey Lender can automate and optimize for your lending operation.

• Loan origination: our system automates every step of origination, from application submission to risk evaluation, and from approval/denial to disbursing the funds.
• Loan servicing: account management is one of the biggest parts of a lending business’ day-to-day activity. Our software addresses everything that happens after the deal is closed until the debt is paid off.
• Collateral management: the platform covers the different collateral types that can be pledged as security for loan repayment, their valuation, and revaluation.
• Loan reporting: the system keeps you up-to-date on the status of each borrower, their loans, risks, and history.
• Regulatory compliance: the platform controls the borrower’s quality, collects all the required documents, and keeps your business compliant from the start.

In addition to lending processes, your business should consider automation for departments like accounting, customer service, marketing, and human resources. 

Accounting Automation for a Lending Business

A comprehensive loan management platform can improve the quality of services and productivity, as well as help lenders make their operation more agile and transparent. This leads to operational costs reduction and better customer service. But it works even better if it’s enhanced with software that simplifies the convoluted accounting processes. 

QuickBooks Online

One of the most popular cloud-based accounting solutions is QuickBooks Online. It’s easy to use and provides a business with a variety of features. An intuitive, customized dashboard and simple reporting lets you balance the books on the go. QuickBooks has both cash-based and accrual accounting. This software is integrated with over 80 partner apps, and offers a free 30-day trial with no annual contract. It’s an ideal choice for startups and SMEs. 

Xero

Another good option for accounting operations is Xero, a cloud-based software with simple interfaces for inventory management, payroll, purchasing, expense and asset management, as well as other basic accounting tasks. The dashboard can be customized to track cash flow all the way from invoices out to payments in.

This software automates bank reconciliation by showing recent transactions, categorizing, and paying invoices automatically.

[related-solutions]

Customer Service Automation for a Lending Business

Live human contact normally makes your customers feel special. However, there are times when they appreciate speed even more. And thanks to intelligent automation they can enjoy high quality, fast response times via live chat or other bot functionality. Here are the most popular tools you can use.

Salesforce

With the help of a productivity suite like Salesforce Essentials your lending business can automate lending support and paperwork, and house the documents on a central platform. This way, everyone involved can stay on the same page and use the self-service options throughout the lending process.

Intercom, Zendesk, and Drift

Users expect immediate response these days, so it’s a good idea to leverage intelligent chat tools like Intercom, Zendesk Chat, or Drift. These three platforms offer a variety of features to help automate customer service. 

They help process applications quicker, allowing you to evaluate a larger volume faster and more accurately. And if you add that on top of TurnKey Lender’s origination module, you can achieve previously unseen levels of automation. Things like checking applicants’ credit reports used to be a tedious process, but now the software can access that information and verify their employment, as well as pull all the data necessary for risk evaluation from a credit bureau or another relevant data source.

Automated origination can improve the process for both lenders and borrowers. When Shepard Capital Partners was challenged with an overwhelming amount of paperwork, the TurnKey Lender team worked out a solution that streamlined their lending business. We removed the paper from the loan application process completely, and automated a slow approval process using our proprietary, deep neural networks suite.

Essentially, customer service automation helps your lending business eliminate waste. But it’s not the last automation area we’re going to explore. 

Marketing Automation for a Lending Business

Another way to increase efficiency of your lending business is to implement marketing automation software to more effectively target your audience across multiple channels. This helps you save both time and money, and increases the return on each penny invested. The marketing areas most commonly automated are email and social media. 

Email follow-ups are a notoriously tedious process when done manually. With HubSpot, business owners can save email templates for automated responses in contact-based, company-based, deal-based, ticket-based, or quote-based workflows which saves a ton of time. 

Depending on an organization’s needs and budget, HubSpot can be used in a variety of ways. From building a website on a proprietary platform to collecting custom sales analytics and generating reports. The platform capabilities are enormous. If you’re considering HubSpot for your lending business, then it’s best to jump on a call with their staff to get a consult on which features will address your needs in the best possible manner. 

Another example would be BuzzStream which helps you automate link building and communication with potential clients. For SEO it’s worth checking out tools like SEMRush or Ahrefs. Your team can also create fully-fledged social media campaigns that send out posts at scheduled times, so you don’t have to be constantly working around the clock. This can be done with tools like Buffer or Hootsuite. And basic automation can be achieved with an auto posting plugin installed into your CMS. 

Your in-house marketing team should start by creating an overarching strategy that drives all the individual marketing tactics. Or you may want to hire a digital marketing agency to make sure everything’s done right.

Even though setting up funnels and lead generation may be tricky, don’t pass on marketing automation. It can be a truly great asset that minimizes expenses and helps to differentiate your company brand name in the eyes of your target audience.

Human Resources Automation for a Lending Business

It may come as a surprise, but your human resources department can also improve their productivity with the help of automation. HR deals with tons of data on a daily basis. All or most of it should be processed and formatted automatically, so they don’t need to input it manually. 

Recruitment is one of every HR department’s biggest responsibilities. Similar to social media posts, any job listing can be scheduled to go out at a specified time. 

Tools like Ideal and Taleo can help lending recruiters filter through resumes and sort them into different categories automatically before a human has ever looked through them. These tools also help to make sure that you are only seeing the resumes of the candidates best suited for each individual job opening. Once the job application process is live, automation will allow you to immediately sort the responses into folders.

Onboarding can be automated by using a cloud-based human resources information system (HRIS) such as Zenefits. With it, your HR department will only need to complete five online fields to begin the onboarding process for each new hire. Zenefits will automatically process employee information after they sign all their agreements online. And when employees leave, HR can remove them from payroll and benefits by initiating COBRA setup with a few clicks. 

Streamline Your Lending Business Through Automation

There are many ways for a lending business to be more efficient. Automation is the key to reducing paperwork, mitigating numerous risks connected to human error, reaching your target audience, and simplifying recruiting. 

It isn’t always easy, but the measurable results can be immense. Automation used to be a luxury, but today it has become a necessary practice to stay competitive in the lending industry. 

If your company is interested in finding out how TurnKey Lender’s market-leading intelligent automation can streamline your business processes, request a free trial.