Instead of a team of underwriters, they can process more applications with far fewer staff. Because the application decisioning is automated, the human underwriter only has to deal with un-typ- ical referral cases that require human intervention, or is free to focus on other areas such as customer retention. But, the killer advantage often over- looked, is that automated lenders can be open for business online 24/7, and make rapid lending decisions 24/7. Because the process is automated (barring a small proportion of refer- rals) there is no need to be restricted to Monday to Friday, 9-5pm office hours. I can’t overstate this when it comes to competing on the increasingly-used internet lending platforms. Those looking for a loan will often be time- short and want a quick yes/no decision. Not a ‘thanks for your application’ and a wait.
Only if you run automated underwrit- ing will you be able to give them their instant decision. What is more, the pur- chasing platforms that attract internet users surfing for finance demand this sort of decision speed. You can imagine the difficulty trying to participate in this channel if you have manual processes. You might have to provide a ‘dumb’ response to a lead that you have paid for, along the lines of ‘your loan is being considered, we will get back to you shortly’. You have bought the lead ‘blind’, as it were, and during the time you are doing your manual underwriting, the prospect is free to continue their internet searches and find other loan providers. By the time you get back to the pros- pect with the offer of a loan, they may well have secured another loan(s) else- where. They may then accept two loans, but can only afford to service one, so your profitable case turns out not to be.
In a digital age where consumers want instant gratification, the screen needs to read ‘Your online loan application is successful, please check your bank account’, rather than ‘Your loan request is being processed, we will be in contact shortly’. Once a prospect is on a site and clicking, you can’t afford to give them the time to look elsewhere, because they will. Finally, and perhaps more significant over the longer term, automated lenders are going to have the ability to leverage the emerging new sources of data from Open Banking. If you don’t automate your underwriting, you won’t be able to do this. They’ll be able to make smarter credit decisions online than you and be more accurate when judging affordability and suitability, which obviously results in a better performing loan book. And this data gap will get bigger and bigger as time passes.
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