Financial services companies offer a wide variety of loan origination services. It supports both commercial and consumer funding, so it is always under pressure to process an enormous volume of applications in a short period of time.
Why is a Cloud-based Loan Origination Software Required?
A loan management system has always been in place in traditional banks. Documentation, verification, and underwriting were slowly transferred from manual processes to custom & online lending software.
Because tech innovation was always one step ahead, their legacy loan management system was lagging in efficiency and effectiveness.
Maintaining on-premise servers and their heavy software meant hours of downtime every time an update was made, resulting in not only lost time but revenue as well.
In order to resolve this issue, it was necessary to implement a less maintenance-intensive process that could handle updates in just a few hours or less. A modern loan origination system evolved from the loan management system, which was moved to the cloud.
Fintech played a major role in the move from legacy loan origination software to cloud-based, customizable software.
Artificial Intelligence (AI), Machine Learning (ML), and other disruptive technologies gradually allowed a rigid process fraught with errors to become more flexible & enabled vulnerability detection.
Cloud-based loan origination systems also introduce transparency and collaboration into the system, increasing efficiency.
Benefits of a Cloud-based LOS
We will discuss the benefits of a cloud-based on, and why lenders should consider it over on-premise, legacy systems.
Improved UX and greater customer satisfaction
A cloud-based loan origination application provides loan applicants with the flexibility and mobility they need to submit loan applications on their mobile devices. Legacy software that runs on-premise servers allows access to information only to a few authorized individuals. To complete paperwork, documentation, and verification processes, applicants must be physically present at the bank.
In addition to being accessible from a smartphone app, modern loan origination systems also promise a smarter interface that allows clients to walk through the process without much assistance.
Smoother authentication and verification
As compared to their legacy counterparts, cloud-based loan management systems are designed to be flexible.
As a result, constant and quick updates that require little to no downtime make the system much more up-to-date. AI and ML are especially useful in solutions that use these technologies to improve their efficiency levels in processes such as verification and credit scoring (underwriting).
Using cloud-based origination software, lenders are able to:
• Automate the whole verification process
• Use multiple sources of verification to verify the applicant’s documents (reducing the risk of errors)
• Verify that all required documents have been submitted.
Automation of Underwriting
Automation of underwriting can help lenders free up a lot of resources, resulting in a revenue boost, reducing errors, and helping the end consumer save money by providing lower and more competitive interest rates.
This is one of the major benefits that cloud-based loan origination software promises lenders, allowing them to gain a greater market share and create a greater presence in a competitive market.
A loan origination software can provide lenders with some of the following features of automated underwriting:
• Identification of low-risk cases that can be accelerated
• Reduced underwriting time
• Automated underwriting with a clear and error-free workflow
A legacy loan origination system’s inability to keep up with the fast-paced changes in the tech industry has already been noted.
It could crash and become inaccessible to the clients it was already serving in the event of an increase in loans.
Growing markets require software that can be scaled according to requirements. The company or the bank should be able to protect itself from threats and breaches by staying up to date on the newest regulatory requirements, protocols, and fintech software solutions.
Cloud-based loan origination systems offer this feature to lenders of all sizes, serving different markets, with little to no downtime. Furthermore, cloud-based systems make it easier to launch new product categories.
Higher transparency and controlled access
The USP of cloud-based loan origination systems is that everything is stored at a separate location on a secure and encrypted server.
With this solution, lenders no longer have to worry about having their on-premise server and legacy software hacked into and losing sensitive customer information, which could lead to a loss of reputation as well as business in the long run.
Cloud-based lending loan origination software (LOS) has strict security protocols in place that make it almost impossible to breach. It is the best loan origination software option for companies or we can say fintech solution for banks.
While selecting a cloud-based LOS provider, lenders can look for the following features:
● Identity and access management
● Protocols against cyber threats
● Privacy
● Security operations
● Regulatory compliance
● Resilience to cyber threats
● Application developing capabilities
Through real-time status updates of each application, both applicants and loan servicing personnel stay on top of respective cases.
The lenders and borrowers do not have to be on the same network to access this information, since cloud computing allows both parties to access relevant information, regardless of their location.
Following are some of the benefits of this granular visibility:
• Easier collaborations among teams across geographies
• Easier access to updated versions, (along with originals) of documents
• Easier resource allocation using access control features
Reduced turnaround time for loan origination
ML-based predictive models, automated verification and underwriting, and continuous and timely software updates reduce the turnaround time, which allows lenders to churn out more loan applications faster with higher accuracy since loan applications can be processed in less time.
As a result, revenues will increase, client bases will grow, and market reach will expand.
How to ensure more security when moving to cloud-based SaaS, like LOS?
Due to the highly competitive lenders market and the growing fintech industry filled with cloud-based loan origination system providers, lenders, such as SME lenders, credit unions, micro-lenders, peer-to-peer lenders, and even traditional banks, know that they have to be at the top of their game to provide their end consumers with the type of loan origination service they expect.
At Analytics Fox Softwares, we have our in-house cloud-based loan origination software which can be customized and used to build a platform that matches a lender’s unique requirements based on their target audience and support them during their lending process.
It is now more critical than ever to move away from legacy systems and proprietary software.
Contact us today to learn more about how we build custom LOS.
