Lending in a Post-COVID World

Life is a little different now than it was just two years ago. Perhaps you do more shopping online or you have to wear a mask when you go to the doctor. 

Lending has changed too. But was it for the better? And if we continue down a more digital path, can regulators even keep up?  

It seems we’re in a sort of “resettling” phase where we assess the hurried decisions we made during that unprecedented time. Reactions happen quickly, but lasting change takes time. 

What Does Lending’s “New Normal” Look Like?

In the early days of the pandemic, lending institutions were so strapped for help with small business loans that they did whatever it took to get them over the finish line. They worked long hours, emailed with clients instead of meeting in-person, and maybe even discovered some shortcuts for getting the job done more efficiently. Those “war-time” modifications gave way to more digital and efficient ways of processing loans they might still be hammering out today. 

Without the pressure of the pandemic, digital transformation in the lending industry may have taken years more to implement. But crisis has a way of accelerating innovation and transforming things for good. 

As the financial and economic effects of COVID continue to play out, so too does the impact on banking and lending leading us to questions like:

  • Do we still need brick and mortar banks?

In a word, yes. Today, there are more than 196 million digital banking users in the US, making up 75% of the population. But a large portion of the economy still heavily relies on brick and mortar banks, especially those in underserved populations. Until alternative remote infrastructure is available and reliable, physical branches must remain. 

  • Is it futile to digitally transform if regulatory bodies will continue to lag?

Not long before the pandemic began, the SBA still would not accept an electronic signature on certain documents — despite the fact that the Uniform Electronic Transactions Act made them as legally binding as handwritten signatures in 1999. Despite a lender’s technical savvy, the docs still needed to be signed by hand and faxed over. 

E-signature technology is now highly advanced and secure. But any change to the SBA, no matter how beneficial or seemingly simple, must go through a lengthy legal process. 

So can the lending industry go completely digital? Absolutely. Will it take some time? For sure. 

  • How will the experiences of next-generation lenders who grew up during COVID impact the industry?

Consider this: It’s entirely possible that the next generation of lenders (think Gen Z and younger) might someday operate banks without ever stepping foot in a physical branch. Having been born in a digital world, this generation is used to living almost completely digital. As they grow up, they’ll bring their digital nativeness with them to accelerate digitization in lending even further.

Technology on the Digital Lending Horizon

New banking and lending technology is already paving the way for a more digital future. Savvy lenders are taking advantage of technology like:

Cloud Computing 

Cloud systems allow businesses to break down silos and work off of a common platform, shorten time-to-market for new services, and soften external-facing resources for easier consumer use and self-service. Even core processes such as credit risk management, payment transactions, and customer due diligence have already moved to the cloud.

Machine Learning 

Machine learning automates standard processes and predicts trends to make them even smarter. Whether alerting lenders when a loan might be headed for trouble or improving the odds of repayment by nudging a small business to prepay during a profitable month, machine learning allows financial institutions to look at data in a whole new way. 

Blockchain

Blockchain lending builds on the peer-to-peer model of blockchain ideology and incorporates traditional lending to create a time-efficient, seamless system. When the loan process is online, blockchain allows for a record of documents and transactions to be kept on an anonymous digital ledger, eliminating the need for third parties and intermediaries. 

SPARK is at the Forefront of Digital Lending

There’s no point in digital transformation for its own sake. It’s not a trend — it’s an absolute imperative to keep up with the industry, competitors, and (especially) the expectation of clients. When you do it right, it not only makes your internal teams more efficient and productive, it helps you delight customers with the optimal experience, building long-term value and credibility and growing profits for your bank.

But not every lending platform is the same. Some are built on other infrastructure like Salesforce or Oracle. That means when you need to make a change, you’re at their mercy to do it. Unless you’re pivoting for a high-brow client, customizing on one of these SaaS platforms won’t be in the cards without significant investment. 

At SPARK, we’re pioneering the latest loan origination technology, helping you surpass the competition, heighten ROI, and win loyalty with modern processes that are as easy for your team as the customer. Plus, our automated platform comes ready out of the box, meaning we’ve already done the heavy lifting for you. We use typical lending scenarios and historical context to create consistency and automate the most helpful processes. From there, we work with you to customize and automate other processes for greater flexibility.

How’s that for future-forward lending?

See SPARK in action by requesting a demo today.