SME loans are notoriously expensive to approve, in fact a study by Deloitte found that large US banks spend between $2,000 and $10,000 to process a loan application. Why? Because it’s incredibly time-consuming to manually move a loan through the application process, which in the case of big banks can spread over a 10-week timeframe. To give this some context it’s important to look at the wider implications of manual processing on performance: Picture each member of your lending team running a booth on a toll road. Every time a car wants to pass through the toll your officer needs to ask multiple questions, check for insurance, ownership, service history, etc. This creates two problems; one it increases the time a car has to wait before it continues on its journey, and two it significantly limits the number of cars your team can process in a specific timeframe. Now compare that to traditional lending processes where your loan officers stop each application to tick all of the data boxes, and it sheds some light on why SME lending costs are so high and business efficiency is a challenge. Enter the automated toll booth. These booths use technology to pull in information about each car that passes through the sensor and then automatically charges the owner the toll fee. Cars flow smoothly through the tolls, payments are automated, and, in a major improvement to efficiency, one person can provide support for multiple booths. Digitization and automation have both streamlined the user experience and massively improved efficiency, and technology can do exactly the same for SME lending. In the next section we’ll focus in on what digitization of SME lending will look like for financial services organizations when they select the right technology.
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