The lending industry had its ups and downs in 2020. In March, the industry came to a standstill when the economy and everyday life stopped.
The lending industry negated those losses between June and the rest of the year. For Fannie Mae, one of the largest mortgage lenders in the world, lending volume reached a record high of $3.9 trillion.
There are a number of factors that are attributed to such high volume, but there is no doubt that technology played a significant role. How is technology changing the lending industry?
Read on to learn how the lending industry is using technology and how lenders can use technology to be more competitive for years to come.
1. Artificial Intelligence
One of the emerging technologies of the last few years is making itself known in the lending industry. Artificial intelligence is being used throughout the lending process to make lending faster.
Administrative tasks like underwriting and compliance are driven by artificial intelligence. A program can automatically determine the credit-worthiness of a customer and predict their ability to pay a loan back on time.
Increased access to customer data is driving this trend. It helps that customers are leaving traces of data everywhere. Lenders know their shopping patterns and social behaviors.
2. Customers Are In Control
Even though the lending industry is working more efficiently thanks to technology and more access to data, customers are still in control.
Customers ultimately control what data lenders have access to. That’s partly because of new privacy laws, but customers are more educated about their digital footprint.
Customers are also in control of the customer experience. They are tired of big financial institutions treating them like another number.
3. Increased Competition
There is more competition in the lending industry than ever. Online lenders and peer-to-peer lenders offer convenience to consumers. Borrowers can apply for a loan online and get approved in a few minutes.
In some cases, they have access to cash within a few days. These sites are forcing traditional lenders to offer online lending options, too.
4. Lenders Can Adapt to Change
If there’s one constant in the lending industry, it’s change.
FinTech companies are better positioned to adapt to changes in the lending world than traditional lenders. One study noted that an increase in lending volume can increase the processing time for traditional lenders by 13.5 days (26%).
That doesn’t seem so bad until you learn that FinTech companies see loan processing times expand to 7.5 days.
These companies utilize the technologies at their disposal to be more efficient and provide a better customer experience. That advantage is forcing traditional lenders to adapt more quickly.
5. Educated Customers
Customers are in control of their data, and they have more information at their fingertips than ever before. In a few clicks, customers can find the best mortgage rates.
They can also educate themselves about various lending products. For example, they can have a beginners guide to conventional loans for people just starting the homebuying process. Other articles can address credit scores and the home loan process.
Lenders can put themselves front and center by writing white papers and blog posts to educate customers. Customers become familiar with these companies over time.
When it’s time for them to find a loan product, they’re more likely to work with the company that helped them learn before they were ready to buy.
What Does the Future Hold for the Lending Industry?
There’s no doubt that technology made its mark in the lending industry. If you want to get ahead of the competition, you need to know what the future holds for the industry. Here are the top trends that will help you get ahead and stay ahead for years to come.
OCR Is the Future
OCR stands for optical character recognition. This allows you to see the text within images and documents. It’s not a new technology, but lenders are using it within their platforms.
You can take a scanned document image or PDF and convert it into a readable document. This helps lenders make better decisions because these documents are searchable.
The marketing and retail industries discovered ways to personalize offers to consumers. They implemented personalized email offers, ads, and recommendations to
It may seem like an invasion of privacy, but consumers actually prefer personalized offers. More importantly, they prefer personalized customer service.
About 84% of consumers will spend more money with brands that provide a personalized customer experience. They’re more loyal to those brands, too.
Lenders are starting to offer more personalization to consumers. When lenders are offering specific products to consumers, they’re able to explain why those specific products are the right ones for their customers.
Increased Outreach to Underserved Communities
There are some communities that have been historically left out of the lending industry. That makes it harder for them to establish credit, own a home, or recover from bad credit scores.
With the increase of artificial intelligence and predictive analytics, lenders can more accurately assess the future credit behaviors of customers. That lowers the lender’s risk and gives more people access to credit.
You can take advantage of this trend by expanding your footprint in the marketplace and actively reach these underserved communities.
Technology Is Changing the Lending Industry
Technology brings with it the promise of doing more with less. That seems appealing to just about every business, but there are few companies that have fulfilled the promise of technology.
In the lending industry, companies have successfully implemented technology solutions to provide a better customer experience, a faster lending process, and a way to limit risk to lenders. It’s transformed the lending industry to be faster and leaner.
Now that you know how technology is transforming lending, visit the Finance section of this site for more financial news.