Digital transformation is reshaping the financial services industry at an unprecedented pace, and commercial lending is no exception. Not only are the needs of borrowers changing, but alternative/fintech lenders are putting up a fierce fight for market share. 

In this context, embracing digital transformation is critical for commercial lenders that want to remain relevant and competitive as borrowers look for more opportunities to access business-critical capital. 

In today’s article, we are going to take a look at what digital transformation means for commercial lenders in the current environment, including challenges, benefits, and technology.

Let’s dive in. 

What’s Driving Digital Transformation in Commercial Lending

Commercial lending has changed radically in the past few years.

Traditional loan processes are paper-intensive, tediously manual, have slower decision times, and are rife with inefficiencies. New technologies, however, are helping lenders streamline their workflows and deliver to customers with a new and improved borrower experience. 

In this section we are going to take a look at some of the main reasons for this recent evolution. 

1. Changing Customer Expectations 

Today’s borrowers are digitally savvy and expect a seamless, convenient, and personalized lending experience

Lenders must adapt to these new preferences by leveraging digital technologies that can rapidly increase the efficiency, speed, and accuracy of lending workflows, as this is a top priority for customers. 

In fact, in a recent EY Global Survey, business owners said they wanted speed and efficiency the most from lenders, including a frictionless application and underwriting process with guaranteed access to credit. 

Lenders can only meet these demands by eliminating archaic, paper-based processes and leveraging new and innovative lending platforms.

2. Increased Competition 

Fintechs and alternative lenders have entered the market with innovative and agile lending solutions creating a competitive landscape that is pushing traditional banks to evolve… or get left behind.

Banks need to adopt and integrate digital lending services to keep up with the growing demands to originate, decide, and close loans at the same efficiency as fintech lenders. Borrowers have more lending options than ever and are growing accustomed to the effortless application and underwriting processes cloud-based products provide.

In fact, customers are willing to switch to alternative lenders that can better meet their requirements. According to the same EY survey linked in the section above, 56% of SMEs already use a fintech company for some banking or payment service, and the number is increasing.

3. Need for Greater Efficiency 

Again, borrowers are now approaching commercial lending in the same way that consumers approach most other products and services in the digital age: “I want it and I want it now.”

Banks that continue to operate with disparate, outdated, and paper-based lending processes are wasting valuable human capital, spending 30-40% of their time on non-core tasks that could easily be automated with new technology.

The result? The borrower is often forced to suffer through a lengthy and inefficient application process, one that forces them to consider working with an alternative lender.

The Problem With Legacy Lending Systems 

Let’s begin this section with a hard truth: commercial lenders (especially community banks) can no longer afford to run their loan processes through legacy lending systems. 

They must adopt a digital transformation strategy for their lending workflows, or face falling out of touch with today’s borrowers.

Legacy systems hinder lenders in a number of ways, including:

  • Speed: borrowers have made it clear that waiting weeks (or months) for approval is a thing of the past. Legacy systems don’t have the ability to automate onboarding, underwriting, and closing workflows.
  • Insight: legacy software lacks real-time reporting, preventing lenders from not only adequately understanding and serving their client’s needs, but also from efficiently managing portfolios.
  • Costs: legacy systems are not only expensive to operate and maintain, but it’s also a challenge to integrate them with new technology. 
  • Scalability: legacy lending software depends on disjointed and siloed systems. Not only does this mean lenders need more time to process fewer loans, but they are also facing an uphill battle to adapt their systems to current times.
  • Vulnerability: technology evolves for the good—but also the bad. The older software gets, the easier it is to breach. Commercial lenders that stick to legacy systems are more vulnerable to cyber attacks and fraud.

In summary:

Lenders who rely on outdated software will continue to lose ground in the digital age. Their growth potential is limited, and their current operations are at risk, as leaner, more agile lenders appear in the market.

Benefits of Digital Transformation for Lenders 

Digital transformation via new and innovative technologies offers lenders a number of exciting benefits.

1. Best-in-Class Customer and Talent Experience 

As previously highlighted, in today’s lending environment, borrowers have more options than ever.

They crave seamless lending services tailored to their preferences. The more personalized and streamlined you make the lending process for them, from application to underwriting to closing, the higher your chances of building a sustainable relationship with a loyal borrower.

Agile lending software can do precisely that for you with a number of features that alleviate friction and bottlenecks, particularly intuitive onboarding/document collection.

In a similar vein, modern tools help attract and retain valuable talent within a company. People expect to work in an organization where technology boosts their productivity—implementing the right software also brings a competitive advantage when it comes to the workforce.  

2. Workflow Efficiency  

As commercial lenders make the switch to more flexible digital lending solutions, tedious manual tasks can be automated, allowing lenders to process more loans, faster.

At SPARK, we have seen first-hand how agile tech drives lending efficiency: our customers average 30-40% time return, the equivalent of 1.5 days a week for each stakeholder involved in the lending process. 

Lenders no longer need to spend hours on paper-based document collection and data reentry. With a modern platform, lenders can streamline the entire lending process, saving time and costs.

With that extra time, you can focus on what really matters: the applicant experience. Spend that day and a half each week on nurturing relationships, and providing that human touch wherever you can.

3. Improved Underwriting

Digital transformation gives lenders enhanced risk management tools that empower underwriting teams.

With artificial intelligence, machine learning, and decision engines, lenders can utilize more sophisticated risk models that offer predictive insights and risk scoring, reducing default rates and ensuring more informed lending decisions.

Underwriting, which has historically been a labor-intensive and time-consuming task, can be significantly accelerated with technology. Automated data gathering and analysis can shorten underwriting times, increasing operational efficiency and improving customer satisfaction as an application more quickly transitions to closing.

4. Data Analytics 

With the adoption of digital technologies, lenders can tap into the power of big data. 

Agile lending platforms can generate and analyze large volumes of data in real time. This data, properly harnessed, can help lenders understand their clients better, improving customer segmentation and allowing for personalized borrower experience.

Data analytics also help lenders monitor loan performance, understand market trends, and make strategic decisions. The use of predictive analytics can provide foresight into market changes, allowing lenders to be proactive rather than reactive.

5. Costs Savings

Digital transformation also leads to significant cost savings. 

Automation reduces the need for manual labor, saving both time and money. The costs associated with paperwork, physical storage, and errors are also reduced or even eliminated.

In addition, most digital lending platforms are cloud-based solutions, which eliminates the need for expensive hardware infrastructure and maintenance, further reducing costs. These savings can then be passed on to borrowers, making the lending institution more competitive.

Digital Transformation: Core Lending Technologies

Three primary technologies are powering digital transformation in commercial lending

  • Automation
  • Big data
  • SaaS 

First, as we have previously touched on, automation is a key driver of modern lending, streamlining various processes within the lending cycle and reducing reliance on manual tasks. 

Automated systems handle high volumes of transactions, freeing lenders to focus on customer growth and loan portfolio expansion. Centralized information enables better borrower engagement, with automatic notifications and easy access to documents.

Second, big data, alongside AI and ML, is transforming credit scoring, allowing commercial lenders to make informed decisions swiftly and accurately. 

Big data analyzes vast amounts of information, improving risk assessment and enabling personalized solutions based on individual customer insights. The result is smarter lending decisions, lower credit risk, and an enhanced experience for both lenders and borrowers.

Finally, SaaS technology provides notable flexibility for lenders. 

It allows lenders to adjust resources such as processing power, storage capacity, and network bandwidth to accommodate fluctuating loan volumes without substantial hardware investments. With universal internet access to the platform, lenders and borrowers can access real-time data and collaborate seamlessly, regardless of location. 

Being flexible and lean also means that SaaS technology has the ability to evolve and innovate with ease, by releasing updates and new features several times a year.  

These technologies work in harmony to drive the digital transformation that’s reshaping commercial lending.

A SPARK of Innovation in Commercial Lending 

The pandemic illuminated the clear advantages of embracing digital transformation for commercial lending—and there’s no going back now. 

Banks and fintech companies integrating agile technology are earning customer loyalty with seamless, automated, fast lending solutions. 

SPARK is proud to be part of this evolution.

Our goal is to help banks and other lending institutions replace their antiquated software and labor intensive processes with streamlined, efficient tools that maximize customer satisfaction and drive their lending into the modern age. 

SPARK helps your organization adapt to growing digital demands, staying ahead of the competition with advanced technologies and a best-in-class cloud platform. 

Embrace the digital transformation and schedule a demo with SPARK today. 



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