Loan Growth and the Importance of Digital Lending

Lending has always been fundamental to the growth and sustainability of credit unions, and during such dire economic times, it’s become even more important. In the past, lending was conducted in-person at branches and was often time-consuming and complicated for members. But the world has changed and the old ways of doing things are changing with it. These days, members want quick and easy digital lending options, and CUs that fail to provide these services risk being left behind.

The pandemic thrust the world into the digital age at an alarming speed, and now digital lending is no longer viewed as an advanced technology but instead has become the new norm. The best digital lending options today enable members to perform the loan process from end-to-end on their mobile devices or computers. As people continue to avoid in-person interactions for their own safety, digital lending will likely play an ever-increasing role in the credit union world.

Understanding the competition

Credit unions were founded on the tenets of collaboration, community involvement, and serving their members first. So, unlike many banks and other financial institutions, competition isn't always at the heart of the credit union ethos. However, today’s market demands that credit unions pay attention to who their competitors are and what they’re doing. Failing to do so could be catastrophic for future business.

Advances in technology are changing member expectations about lending and are having a major effect on how all sorts of financial institutions do business, including credit unions.

Are credit unions failing when it comes to digital lending?

According to the Digital Lending Review sponsored by Meridianlink, 2019 saw an increase in organizations offering digital lending services. However, although more CUs are adopting digital lending options, many are simply automating existing inefficient processes and offering members services that are substandard compared to the services offered by other institutions, who often focus solely on the digital experience. 

Here are some of the important discoveries from the 2019 Digital Lending Review:

• Although CUs are introducing more and more digital lending options, most loans still require involvement by the branch.
• Digital lending applications provided by CUs are failing to meet the expectations of members, who will compare their experience to all of their digital experiences, not just experiences with other financial organizations.
• The demand for digital lending options continues to grow and may even be underestimated.
• Some CUs and financial institutions are working with fintech providers to find solutions.

It appears the writing is on the wall. If CUs cannot find a way to offer digital lending solutions that are better or at least equal to the competition, they’re going to have a long road ahead.

How can CUs improve their digital lending?

The first step for improving any service at your CU is to understand what your members want. As for lending, one thing is clear—members will no longer be satisfied with the legacy back-office lending process. The future demands quicker, digital solutions.

Here are some of the key features members expect from digital lending services:

• Speed. The bottom line is people are becoming less patient. As technology continues to enhance speed and efficiency in nearly all aspects of our lives, members no longer want to wait even a day to find out if they’ve been approved for a loan. Instant or near-instant loan approval is the new bar to meet.
• E-Signature options. E-Signature technology allows members to sign important documents like loan applications quickly and easily from their laptop or mobile device. Using the right core technology software can help your CU provide e-Signature and other digital lending technologies.
• End-to-end digital solutions. It’s one thing for CUs to digitalize part of their loan application process, but if members still need to go into the branch for anything, the competition is winning. The new standard is that members want the option of completing the entire lending process from their mobile device or computer.
• Seamless integration. As CUs adopt new technologies, they must do so in a way that is user-friendly for their members. That means it’s essential to partner with a core processing solution that seamlessly integrates efficient products and services that will enhance the digital lending processes within your credit union.

One advantage CUs have is that they have established relationships with their members. Other institutions, on the other hand, are often purely transactional and have no real relationship with their customers or users. For credit unions, it's important to continue leveraging relationships while transitioning to improve upon digital lending options.

Finding the right digital solutions

Another important aspect of digital lending involves choosing the right core data processing system for your CU. Credit union core software can improve your digital lending practices, online and mobile banking options, and many other factors that will affect the overall sustainability and growth of your CU. And it can do so without increasing your overhead or need for more employees.

A few other things a quality core software solution can do for your CU include:

• Free up time for employees.
• Increase productivity and efficiency.
• Help cut costs to make smaller loans more profitable.
• Distinguish your CU from the competition.

With the continual encroachment of other financial institutions in the lending space, the need for an efficient credit union core software is undeniable. Credit unions who find themselves struggling to compete with the rise of digital lending options should evaluate their core system software and decide whether it’s time to make a change.

Check out our case study to learn how one New York credit union sparked loan growth through digital lending.