The past two years have been a whirlwind for the lending industry. 2020 gave us overworked systems caused by droves of PPP applications, while 2021 was filled with forgiveness applications to process while managing a “new normal” of remote work and digital transformation.
But the change isn’t over.
As we look back on the things we’ve endured since 2020, it’s clear that each year brings new surprises. And while we can’t predict them, we can certainly prepare. Here’s what SPARK’s doing to proactively respond to the industry trends we believe we’ll see in 2022 and beyond.
Setting a Foundation
One of the biggest differentiators between cloud and legacy software is how it responds to change. Over the past year, we’ve updated the SPARK platform with new features, including:
- Platform redesign. Informed by interviews with our customers, we designed a new and improved dashboard experience to surface the most relevant details about loan packages, work assignments, and business-level details to help users maximize their SPARK experience.
- Total exposure to customer. We aggregate the lending activity of each small business customer in the platform, taking it a step further to explore the borrowing history of each principal of the business as well.
- Lender contact access. LSP customers are now able to segregate data, products, and processes within their environments. This enables customers that serve others through the platform to engage on numerous fronts with multiple audiences without requiring individual instances of SPARK.
- Decision tracking. Lenders can gather approvals from users within the enterprise based on their individual internal approval matrices. We centralize the data and documents required to make an approval and present that information in a clear and concise way to each approver.
- PPP forgiveness. When the SBA released new 3508 and 2508EZ forms to aid in the PPP forgiveness process, the SPARK development team delivered updated forms and processing framework, allowing lenders to complete the forms before the SBA was even ready to accept them.
Times They Are A-Changin’
We believe the improvements we’ve made to the SPARK platform over the past two years set a solid foundation for what’s to come. As the industry becomes more digitally savvy, we predict deeper response and investment in trends like:
Blockchain has been perceived as both a threat and an opportunity in the lending industry. But lending powered by blockchain presents strong value propositions for consumers looking for more security, infinite traceability, and inherent trust. In terms of scale, by 2030, blockchain has the potential to add $1.76 trillion to the global economy.
When the lending process is taking place on a blockchain, the technology would support the process of evaluation, establishing trust, and documenting the lending of currency nearly instantaneously, thus eliminating the need for third parties and intermediaries in the process. We believe its adoption will occur gradually, then suddenly in loan origination with novel applications (think equipment UCC filings occurring on a blockchain), slowly converting small pieces of the process over time.
- Data Analytics & Predictive Intelligence
Today, most banks function as reactive hospitals with “patients” (business owners) who come to them when they have a problem (need a loan). In the future, we believe the loan origination industry will be the one to reach out first based on the data of the business, proactively intercepting problems before they occur. For humans, anticipating and tracking these reactions is too complex. But predictive intelligence can foresee the problem, alerting lenders to preemptively approach business owners. This gives business owners a choice: take out a working capital loan now to get through the challenge and pay it back later OR increase prices today to absorb the blow when the tension occurs down the road.
- Increased Regulation
The banking and business lending space won’t become any less regulated in the near term. In fact, the opposite may be true. As section 1071 of the Dodd-Frank Act becomes more of a reality, traditional lenders will be forced to respond. Unfortunately, for lenders still running on some combination of Word, Excel and a network share, the task of assembling business owner data required to comply with 1071 will place an undue burden on already-stretched operations. Lenders who’ve gone through the digital transformation will simply push a button to send the data to the CFPB.This is only one small piece of the regulatory puzzle lenders will face in the next generation of business lending.
Decentralized finance (DeFi) is a theoretical construct that eliminates the traditional players and forces that operate today’s financial infrastructure. Essentially, think of a world where there is no central bank, no government, no clearing houses, no specific entity that has control to edit transactions, inflate or deflate valuation, approve or deny transactions – there is one master ledger and that ledger is publicly owned. In the future, when business owners need capital, they’ll be able to find it with ease. Most of the lending/borrowing will occur on an immutable blockchain where individuals will interact with each other without a trusted intermediary. The blockchain and its users will provide the trust that banks and others charge for today. Borrowers will no longer need to prove who they are. Instead, they will likely pass non-fungible tokens (NFTs) between each other, which will contain sensitive data owned by each individual – the data upon which the trust will then be established. Borrowers and lenders will simply be allowed to transact and it’s blockchain technology that makes this concept even a remote possibility.
Are You Ready for the Future of Lending?
As the industry continues to bounce back from the enormous blow of 2020, it’s imperative for banks to have a lending platform that keeps them prepared and able to pivot quickly when changes occur.
Yet, not all solutions are created equal. The best systems are those that:
- Include intuitive, accessible design that’s easy to navigate
- Bring together data from multiple sources and providers
- Pull in existing data within the bank
- Require data input only once to be used throughout the entire process
- Use AI to predict and understand what to do next
- Will incorporate and help you take advantage of trends as they become operational
At SPARK, we’re on the forefront of the latest loan origination technology, helping you adapt quickly, increase efficiency, and stay ahead of the game with modern processes that help you pivot at a moment’s notice.
Join the next generation of lending by scheduling a demo today.