5 top tech trends transforming digital lending

Lenders must transform digitally to survive in today’s rapidly evolving competitive market by addressing customer expectations says Karthik Kumar, Global Head Mortgage Practice, Tata Consultancy Services and leading lending technologist specialist.

Digital-driven change is rapidly transforming industries across the board, revolutionising how we sell and consume products and services.

The ramifications of the first smart phone thirteen years ago are still being felt, with apps all but eradicating the CD market, disrupting the taxi industry, digitising photography and even prompting 15 per cent drop in chewing gum sales, as shoppers now spend time on the phone while waiting for their turn in the check-out queue. 

In the lending market, changing customer expectations is driving significant disruption for want of faster, easier and empowered experience. 

Mobility solutions, automation, artificial intelligence and cloud capabilities are powering up offerings, enabling customers to click and compare loans from any device, at any time of day.

Lenders need to transform their businesses to deliver certainty in today’s dynamic environment.

“Digital is radically enhancing customer experience throughout the loan journey and this is driving customers’ expectations higher and higher,” Karthik says. “Lenders need a clear transformation strategy to keep up.”

5 steps to transformative change

It’s important to trust your digital provider to carry out a clear transformative strategy. TCS is recognised as a leader in the lending technology landscape. 

The prestigious Everest Group named TCS as an absolute Leader and Star Performer in its Application and Digital Services in Banking PEAK Matrix in 2020. 

Leading analyst firm NelsonHall also named TCS as Leader in its Digital Banking Services NEAT Report 2019.

“TCS leverages its expertise in cognitive technologies, analytics, automation, IoT, and cloud to deliver end-to-end solutions,” Karthik says.

Reimagining your lending business and giving impetus to your digital strategy by making it more focused, engaging and of course profitable can be accomplished through 5 key tech trends, he says.

Putting customers at the centre of digital transformation

Customer experience is the core of every business. The first step is understanding their needs, behaviours and priorities online. 

With our fast-paced lifestyles, satisfaction is intimately linked to instant gratification. This is what driving ongoing innovation in lending and the need for providers to continually transform their business models, Karthik says.

“Customers are demanding immediate accessibility,” he says. “Services have to be available when and how they want it.”

Innovation with AI, big data and cloud-based computing is making loan processes super fast, streamlined and importantly more tailored.

“Customers want lenders who empathise with their individual needs. Every transaction has to be relevant and fine-tuned to their unique circumstances.”

Another important factor is peace of mind and that comes with transparency. 

“Customers want to feel fully informed and safe about their decisions.”

By adding this kind of value, customers feel more empowered, and this deepens their relationship to make them more loyal.

Machine First Delivery Model (MFDMTM)

Secondly, we have to recognise that lending is fundamentally about people and relationships. Gaining customer’s trust requires emotional intelligence and being sensitive to the benefits and risks of their investment. 

This is uniquely human and something machines can never replace, well perhaps not just yet.

“Customers are often vulnerable and confused about what’s available and what’s best for them. It’s scary making the biggest financial commitment of your life,” Karthik explains.

“Lenders are there to give guidance and confidence that the choices customers make are the right ones.”

None of this means, however, that humans can’t innovate using technology. 

Digital transformation is behind some of the industry’s most dynamic improvements. These changes are making life a whole easier both for lenders and customers.

“Machines are taking over simple tasks leaving professionals free to manage complex issues or find new ways to improve customer experience and performance. The hallmark of successful organisations will lie in their ability to give machine the first right of refusal to deliver exceptional customer experience and business performance.”

Smart lenders, through automations, making the operations more convenient and accessible while increasing their capabilities and productivity. 

“Imagine what you could do with the extra time and resources if compliance and forms such as property evaluations and titles, banking and personal income statements were all automated online.”

Lenders are also harvesting masses of data that is being put to actionable use.

“This is a powerful way of extracting real-time insights about individual customers to create experiences that keep people coming back for more.”

Transforming your LOS with microservices, at your pace, your way

Lending is still paper intensive and requires a lot of arduous manual human work, pouring over documents for accuracy and detail. 

There is no rest, from the moment the original application is made to when the funds land in customers’ accounts. 

For customers, digital technology is reducing the time to fill out applications to a matter of clicks while competition between lenders is being pumped by the speed of response time.

But Karthik warns that finding the best technology requires the best advice. 

“Some lenders aren’t getting the outcomes they could be. They rush to replace legacy loan origination systems which ends up costing much more than they get back.”

Transformation can be a whole lot less costly, more flexible and beneficial when lenders switch to new integrative microservices.

“Cloud-based microservices are like Lego blocks that can be added to your existing system one at a time. This gives you the ability to respond to business and regulatory changes with far more ease and flexibility.” 

How to prepare for constant change

Change, both planned and unplanned, is flying at us at warp speed. All this uncertainty poses challenges for lenders trying to plan strategically for the future. After all, being able to adapt as fast as change unfolds is the new competitive advantage.

We can’t control what’s on the horizon or how competitors are innovating, but by keeping our eyes focused on the road ahead, we’re more open and prepared to snatch opportunities as they arise.

It’s customers who are in the driving seat, Karthik says, and their hunger for greater convenience will spur innovation and market competition.

“Lenders are looking for new ways to increase their speed and agility. This is how new digital and neobank lenders have risen to challenge existing participants.”

What trends can we trust? If it’s having a positive impact on customers, you can be sure it’s the way forward, Karthik adds.

“Look around in your immediate ecosystem, can you strengthen what you do by partnering with others? You can be guaranteed this is how your competitors are going to be expanding and innovating in future.” 

The need for speed: The core of customer service

Lastly, speed is king in today’s hyper-connected digital world. It’s the fastest lenders rather than the cheapest who will win more customers.

“Consumers are increasingly choosing speed and convenience over price when it comes to their loans,” Karthik says.

Again, the power of digital platforms are transforming customer experience. 

Lenders are digitising their application review processes making approvals ten times faster while reducing costs and risks along the way.

APIfication, automation, AI and machine learning is speeding up the loan process, integrating collaboration between third parties and increasing data quality.

“This is leading to better quality in terms of outcomes at much lower costs,” he says.

“Consistency of service and intuitive, simpler online offerings that put customers first is what will set the best lenders apart.”

Karthik Kumar, Global Head, Mortgage Practice, Tata Consultancy Services (TCS) is a change catalyst for technology innovations in the mortgage industry. He is a seasoned mortgage banking leader with 24 years of diverse experience in Mortgage Transformation, Solution architecture. He is based out of Dallas, Texas. TCS is a leading provider in digital mortgage solutions and has been recognised as a leader in both Mortgage BPO Services PEAK Matrix™ Assessment 2019, Everest Group and NelsonHall’s NEAT Report on Next Generation Mortgage & Loan BPS, 2018.