5 Ways Banks Can Keep Up With Consumer’s Digital Demands

As technology progresses, more financial institutions will face scrutiny from consumers seeking features powered by advanced digital banking platforms.

Consumers are actively searching for banks that value them by giving them remote, customized experiences. Many banks have seen record growth in digital banking usage in recent years, according to a Deloitte Insights report. While this might create a challenge to many financial institutions, it can also be an opportunity to further build relationships with consumers. Below are five things banks should do to proactively respond to customers’ digital needs in their next stage of growth.

1. Analyze Consumer Data
Gaining real-time insights from consumer data is one way banks can start improving customer experiences. Analyzing data allows banks to see how, when and where consumers are spending their money. This data is a gold mine for creating custom approaches for individuals or recommending products that a consumer could benefit from. This electronic trail of customer information can ultimately lead to more personalized financial strategies, better security features and more accurate insights as to what digital banking features will be needed in the future.

2. Humanize The Digital Experience
Financial Institutions are being given a chance to humanize their digital banking platforms. Banks can build and strengthen relationships with their consumers by customizing their mobile experience — right down to the individual. Listening to feedback and valuing a customer’s experiences can create productive and useful relationships. It is important to take a customer-centric approach, whether in-person or through digital platforms. Financial institutions can use consumer purchase history to create custom reward offerings — like 10% off at their favorite coffee shop or rewards on every purchase — that lay the foundation for a bespoke, valuable experience.

3. Understand Digital Trends
According to Forbes, 95% of executives say they are looking for new ways to engage their customers. Financial institutions that remain complacent and tied to their legacy systems can expect to fall behind their competitors if they do not keep up with advancing digital trends. Consumers increasingly shop around and compare account offerings and benefits; they are choosing customizable, digital solutions. Banks that don’t, or refuse to, keep up with digital trends will lose these relationships. As technology expands, so do the needs of consumers —it is up to banks to keep up with those needs.

4. Utilize Advance Card Features
Technology’s rapid advancement means that the digital features that banks can take advantage of have also advanced. Consumers want features that correspond with their everyday financial management strategies and spending. Virtual cards with state-of-the-art security features are just one of the many digital solutions available to banks. Adjustable settings, like the ability to block and unblock merchants, create family hubs, set spending limits for individuals and family members, are just a few of the ways that banks can differentiate their card programs.

5. Keep Evolving
Many banks use legacy systems that are outdated, expensive and difficult to uproot. This technology strategy holds them back from being on a level playing field with their competitors. However, partnering with fintechs that can integrate with their current systems is one way that banks can keep up with digital trends — without the upfront cost of installing an entirely new system.

According to a FICO study, 70% of U.S. bank customers report that they would be “likely” or “very likely” to open an account at a competing provider if that provider offered services that addressed their unmet needs. Today, consumers do not just prefer digital banking: They expect it. Banks that cannot provide their consumers with customizable digital options are at a disadvantage.

How Bankers Can Use Relativity to Power Tech Decisioning

“A good plan, violently executed now, is better than a perfect plan next week.” – Gen. George Patton Jr.

Banking has been around for thousands of years, but digitization of the industry is new and moving fast. The changes have left some bankers feeling stuck, overwhelmed with the sheer number of technology choices, and envious of competitors rocketing into the future.

Back in the boardroom, directors are insisting the team design its own rocket, built for speed and safety, and get it to the launch pad ASAP. The gravity of this charge, plus the myriad other strategic initiatives, means that the bank is assessing its tech choices and outlook with the same exhaustive analytical vigor as other issues the bank is facing, and at the same speed. This is a subtle, but significant, error.

Based on experience leading both financial institutions and fintechs, I’ve seen how a few firms escaped this trap and outperformed their competitors. The secret is that they approach tech decisions on a different timescale, operationalizing a core principle of Albert Einstein’s theory of special relativity known as time dilation: that, put very simply, time slows down as velocity increases.

How can executives apply relativity to banking?
Our industry exercises its colossal analytical muscles every day, but this strength becomes a weakness when we overanalyze. Early in my career, I reported to a credit officer who routinely agonized over every small business loan. Each one seemed unique and worthy of lengthy discussion. He would only issue a decline after investing many hours of the team’s time analyzing together; the team lost money on loans the bank never made.

The same mistake can occur when banks assess their fintech options. Afraid of missing a risk factor and anxious to please the board, executives fall into the trap of overanalyzing. There’s good reason to justify this approach; major projects like a core conversion are truly worthy of great care and deliberation.

But most tech decisions are not as risky and irreversible as a new core. Just as we can download apps to a phone and later remove them, the industry has embraced the concept popularized by Amazon’s former CEO Jeff Bezos of a “two-way door” to deliver turnkey solutions that are fully configured and ready to use in a matter of hours. Developers are writing new code and deploying to the cloud continuously, with no downtime. A few companies, including Cirrus, even offer money-back guarantees, to eliminate a bank’s perceived risk from the decision.

Tech moves fast. What can happen when a bank accepts this challenge and invests in rapid tech decisioning? There are three important aspects of time dilation to consider:

1. Even at only a slightly higher velocity, it has been empirically proven that time marginally slows down. The rate of change in time increases parabolically as velocity increases.
This means that increasing the speed with which your bank makes decisions, even a tiny bit, pays off immediately, and the learning curve will magnify payoffs as the bank improves its decision-making process. There’s a significant compounding effect to this discipline.

2. When traveling at faster speeds, time appears to be passing no differently; to an outside observer, your clock is ticking slower.
Once the team is accustomed to making good tech decisions rapidly, its normative behaviors may seem odd to outsiders. Your colleagues in other internal departments who have become jaded by previous approval cycles may not be able to believe how rapidly your bank is now able to stand up new solutions. Your firm will accomplish much more than before.

3. The faster your velocity, the more mass you accrue.
Making decisions quickly frees up time for more decisions. Decision-making is a force multiplier. It’s not just your clients who will appreciate the upgrade — your vendors will be energized as well, and far more likely to treat you as a valued partner than a counterparty.

Intrinsically, banking exists to solve problems, but to solve problems, we must make decisions. Decision-making is a core competency of good banking. The bankers who are winning — and, candidly, having a lot more fun these days — approach their tech decision process with the same care and weight as their credit decision process. They no longer make tech decisions on a banking timetable; instead, they are creating time by moving faster.

A Look Ahead to 2022: The Year of Digital Lending

2021 has been a year of challenge and change for community bankers, especially when it comes to lending.

Banks modernized and digitized significant portion of loan activity during the pandemic; as a byproduct, customers have begun to realize the inefficiencies in traditional lending processes. Community financial institutions that hope to stay ahead in 2022 should prioritize the incorporation of digital and automated loan processes.

Although the need to digitize commercial lending has long been a point of discussion, the Paycheck Protection Program (PPP) sparked a fire that turned talk into action for many institutions. Bankers quickly jumped in to help small businesses receive the funding they needed, whether that meant long hours, adopting new technologies or creating new processes. The amount of PPP loans processed in that small window of time would not have been possible without many bankers leveraging trusted technology partners.

One result of this approach was enhancing transparency and boosting efficiencies while helping small businesses at the same time. Many in the banking industry saw firsthand that, despite the commonly held belief, it is possible to digitize lending while maintaining personal, meaningful relationships. Bankers do not have to make a choice between convenience and personal connection, and we expect to see more institutions blend the two going forward.

Bankers also have a newfound familiarity with Small Business Administration programs following the wind down of the PPP. The program marked many institutions’ first time participating in SBA lending. Many now have a greater understanding of government guaranteed lending and are more comfortable with the programs, opening the door for continued involvement.

Embracing digitization in lending enhances efficiencies and creates a more seamless experience not only for the borrower, but for employees institution-wide. This will be especially important as the “Great Retirement” continues and bank executives across the country end their careers with no one in place to succeed them. To make the issue even worse, recruiting and maintaining technology talent has become increasingly difficult — even more so in rural markets. Such issues are leading some banks to sell, disrupting the businesses and communities that rely on them.

Partnering with technology providers can give institutions the bandwidth to effectively serve more small businesses and provide them with the customer experiences they have come to expect without increasing staff. Adopting more digital and automatic aspects in small business lending allows banks to reduce tedious manual processes and optimize efficiencies, freeing up employee time and resources so they can focus on strategy and growth efforts. Not to mention, such a work environment is more likely to attract and retain top talent.

Using technology partners to centralize lending also has benefits from a regulatory compliance standpoint, especially as potential changes loom on the horizon. Incorporating greater digitization across the loan process provides increased transparency into relevant data, which can streamline and strengthen a bank’s documentation and reporting. The most successful institutions deeply integrate lending systems into their cores to enable a holistic, real-time view of borrower relationships and their portfolio.

Community institutions have been a lifeline for their communities and customers over the last two years. If they want to build off that momentum and further grow their customer base, they must continue to lean into technology and innovation for lending practices. Developing a comprehensive small business strategy and digitizing many aspects of commercial, small business and SBA lending will position community banks to optimize their margins, better retain their talent and help their communities thrive.

Furthering Digitization, Automation to Push Digital Transformation

 

Banks proved during the pandemic that they are capable of rapid digital transformation when absolutely necessary, with minimal interruptions. Now, they must build on those recent investments by evaluating what improvements will be most valuable to deliver an optimal customer experience.

With the multitude of touchpoints, both in-person and online, each step in a customer’s journey presents an opportunity for you to learn more and uncover insights. Banks can unlock insights with always-on customer engagement. Being agile and nimble will give them the ability to both react to changing market conditions — and get ahead of them.

Topics addressed include:

  • Evaluating Further Digitization
  • Shifting Traditional Mindsets
  • Importance of Staying Agile, Nimble

What Does Today’s Community Banker Look Like?

After more than a year of great uncertainty due to the coronavirus pandemic, the biggest driver of change for community banks now will likely come from customer behavior.

The shift towards digital banking that took off during the pandemic is expected to become permanent to some degree. Customers are most likely to use online or mobile channels to transact and they are becoming more involved in fraud prevention, with measures such as two-step verification. They are also performing an increasing number of routine administrative tasks remotely, like activating cards or managing limits. Branches are likely to endure but will need to rethink how to humanize digital delivery: The Financial Brand reports that 81% of bankers believe that banks will seek to differentiate on customer experience rather than products and location.

Digitalization is good news for community banks. It reduces pressure on the branch network and increases opportunities to develop the brand digitally to reach new customers. But it also creates an obligation to deliver a good digital experience that reduces customer effort and friction. In the digital age, customers face less costs of switching banks.

Banks that assume they will be the sole supplier of a customer’s financial services or that a relationship will endure for a lifetime do so at their own risk. President Joseph Biden’s administration is promoting greater competition in the bank space through an executive order asking the Consumer Financial Protection Bureau (CFPB) to issue rules that give consumers full control of their financial data, making it easier for customers to switch banks. Several countries have already implemented account switching services that guarantee a safe transfer. How should community banks respond so they are winners, not losers, with these changes?

With their familiar brands, community banks are well positioned for success, but there are things they must do to increase customer engagement and build loyalty. Continuing to invest in digital remains crucial to delivering a digital brand experience that’s aligns with the branch. Such investment will be well rewarded — not only in retaining customers but also attracting new ones, particularly the younger generation of “digital natives” who expect a digital-first approach to banking. The challenge will be migrating the trust that customers have in the branch to the app, offering customers choice while maintaining a similar look and feel.

The branch will continue being a mainstay of community banking. Customers are returning to their branches, but its use is changing and transactions are declining. Customers tend to visit a branch to receive financial advice or to discuss specific financial products, such as loans, mortgages or retirement products. Some banks already acknowledge this shift and are repurposing branches as advice centers, with coffee shops where customers can meet bankers in a relaxed atmosphere. In turn, bankers can go paperless and use tablets to guide the conversation and demonstrate financial tools, using technology augmented by a personal touch.

Community banks can play a crucial role in promoting financial literacy and wellness among the unbanked. As many as 6% of Americans are unbanked and rely on alternative financial services, such as payday loans, pawnshops or check cashing services to take care of their finances. According to a 2019 report by the Federal Reserve, being unbanked costs an individual an average of $3,000 annually. By increasing financial inclusion, community banks can cultivate the customers of tomorrow and benefit the wider community.

Cryptocurrencies are the next stage of the digital revolution and are becoming more mainstream. Although community banks are unlikely to lose many customers in the short term over cryptocurrency functionality, these digital assets appeal to younger customers and may become more widely accepted as a payment type in a decade. Every bank needs a strategy for digital assets.

The shift to digital banking means bank customers expect the same experience they get from non-financial services. Application program interfaces (APIs) have ushered in a new era of collaboration and integration for banks, their partners and customers. APIs empower banks to do more with data to help customers reduce effort, from automating onboarding to access to funds and loans immediately. At a time when community banks and their customers are getting more involved with technology, every bank needs an API strategy that is clearly communicated to all stakeholders, including partners and customers. Although APIs cannot mitigate uncertainty, they do empower a bank to embrace change and harness the power of data. Banks without an APIs strategy should speak to their technology partners and discover how to find out how APIs can boost innovation and increase customer engagement.

Leveraging Rationalization to Tackle Digital Transformation

The coronavirus pandemic has had a notable impact on financial institutions, creating a more-urgent need to embrace digital-first banking. However, shifting to digital doesn’t just mean adopting new digital banking tools — a common misconception. Rather, it requires that banks rethink their holistic digital strategy to evolve alongside customer expectations, digitize all aspects of the financial journey and connect their customers’ digital and physical experiences.

Such a transformation boils down to determining which processes are digital-ready and which will need to be overhauled completely. Enter rationalization.

Relying on rationalization
Three billion people will access banking through digital devices this year, according to one estimate from Deloitte. Most banks have 3, 5 or even 10-year plans, but struggle to determine where to start. Think of rationalization as triage for banks: It allows them to identify which processes are ready to be digitized right now, and which need to be reimagined entirely before embarking on digitization.

Consider the process to open a checking account. It’s a simple process, requiring proof of identity and address, and a form to complete. Customers are generally good to go. This is a prime example of a digital-ready banking service that should be moved online immediately — and that can be accomplished rather easily.

Compare that to applying for a loan: a process that involves careful evaluation of the applicant and a mountain of paperwork filled with lengthy, confusing terms and requirements. If the process is intimidating to consumers with the help of a professional, imagine how it feels left to their own devices.

For processes that contain inherent points of friction, like the loan application example above, digitizing may simply make the cumbersome process quicker. Outdated, clunky processes must be revamped before they can be digitally transformed.

Putting customers at the center
Customers are the most important part of rationalization. As customer expectations have rapidly evolved, it’s time for institutions to modernize the digital experience to strengthen relationships and solidify loyalty. Some areas that banks should consider when evaluating the customer experience include:

  • Automating previously manual processes can reduce costs, improve efficiency and deliver an “always on” experience.
  • Ease-of-use. Along with being more accessible to people who might resist digitization, intuitive use and educational resources are integral to customer adoption and success.
  • Constant support. According to Accenture, 49% of customers say real-time support from real people is key to fostering loyalty.
  • Enhanced security. Strong security efforts are fundamental to giving customers peace of mind, which is critical when it comes to their money.
  • Make simple possible. Remove friction from the process to enhance the customer experience.

As banking catapults into a digitally dominant era, institutions should establish a presence across all digital touchpoints — desktop and web browser, mobile apps, even social media — to enable customers to access financial services and information at their convenience. A mobile-first mentality will help ensure that products and services work seamlessly across all devices and platforms. Consistency here is key.

Customers are ultimately looking to their institutions to solve their individual financial problems. Banks have a wealth of data available to them; those that seek to create the strongest relationships with customers can leverage these insights to tailor the experience and deliver relevant, timely products and support to meet their unique needs.

All sectors faced the same challenge over the course of the pandemic: How does a business survive physical separation from their customers? Industries like retail were better prepared for expedited digital transformation because they’ve been establishing a digital presence for years; they were largely able to rationalize quicker. Hospitality sectors, on the other hand, more closely mirrored banking in that many processes were far behind the digital times. Some restaurants lacked an online presence before the pandemic, and now must undergo their own version of rationalization to remain in business.

While rationalization looks different to each vertical, the central mission remains the same: determining the best, most sensible order of digital transformation to provide the best customer experience possible. Those companies that leverage the principles of rationalization to manage the massive migration to digital will be better positioned to solidify and capitalize on customer loyalty, and keep their institutions thriving.

Three Things Bankers Learned During the Pandemic

It’s been well documented how the pandemic lead to the digitization of banking on a grand scale.

But what bankers discovered about themselves and the capabilities of their staff was the real eye-opener. Firms such as RSM, an audit, tax and consulting company that works with banks nationwide, saw how teams came together in a crisis and did their jobs effectively in difficult circumstances. Banks pivoted toward remote working, lobby shut-downs, video conferencing and new security challenges while funneling billions in Paycheck Protection Program loans to customers. The C-suites and boards of financial institutions saw that the pandemic tested their processes but also created an opportunity to learn more about their customers.

Overall, the pandemic changed all of us. From our discussions with the leaders of financial institutions, here are three major things bankers learned about themselves and their customers during the pandemic.

1. Customers Want to Use Technology
Banks learned that customers, no matter their generation, were able to use technology effectively. Banks were able to successfully fulfill the needs of their customers, as more devices and technologies are available to banks at all price points and varying degrees of complexity. Post-pandemic, this practice will continue to help increase not only internal efficiencies but convenience for customers. As banks compete with many of the new digital providers, this helps even the playing field, says Christina Churchill, a principal and national lead for financial institutions at RSM US LLP.

Did you have a telemedicine appointment during the pandemic? Do you want to go back to driving to a doctor and sitting in a waiting room for a short appointment, given a choice? Probably not. Nor will bank customers want to come to a branch for a simple transaction, says Churchill.

The pandemic made that all too clear. Banks had to figure out a way to serve customers remotely and they did. Digital account opening soared. Banks stood up secure video conferencing appointments with their customers. They were successful on many counts.

2. Employees Can Work Remotely
The myth that bankers were all working effectively while in the office was exposed. Instead, some found employees were more effective while not in the office.

Technology helped bridge the gap in the existing skill set: Bankers learned how to use technology to work remotely and used it well, says Brandon Koeser, senior manager at RSM. Senior leaders are finding that getting employees back to the office on a strict 8 a.m. to 5 p.m. schedule may be difficult. “Some bankers have asked me, ‘do we return to the office? Do we not go back?’” says Koeser. “And I think the answer is not full time, because that is the underlying desire of employees.”

After surveying 27,500 Americans for a March 2021 study, university researchers predicted that Covid-19’s mass social experiment in working from home will stick around. They estimate about 20% of full workdays will be supplied from home going forward, leading to a 6% boost in productivity based on optimized working arrangements such as less time commuting.

Still, many senior bank leaders feel the lack of in-person contact. It’s more difficult and time-consuming to coach staff, brainstorm or get to know new employees and customers. It’s likely that a hybrid of remote and in-person meetings will resume.

3. Banks Can Stand Up Digital Quickly
Banks used to spend months or years building systems from scratch. That’s no longer the case, says Churchill. Many banks discovered they can stand up technological improvements within days or weeks. Ancillary tools from third-party providers are available quickly and cost less than they did in the past. “You don’t have to build from scratch,” Koeser says. “The time required is not exponential.”

Recently, RSM helped a bank’s loan review process by building a bot to eliminate an hour of work per loan by simply pulling the documentation to a single location. That was low-value work but needed to be done; the bot increased efficiency and work-life quality for the bank team. A robotic process automation bot can cost less than $10,000 as a one-time expense, Churchill says.

Throughout this year, senior bankers discovered more about their staff and their capabilities than they had imagined. “It really helped people look at the way banks can process things,” Churchill says. “It helped gain efficiencies. The pandemic increased the reach of financial institutions, whom to connect with and how.”

The pandemic, it turned out, had lessons for all of us.

How Community Banks Can Drive Revenue Growth During the Pandemic

Community banks are the beating heart of the American banking system — and they’ve received a major jolt to their system.

While community banks represent only 17% of the US banking system, they are responsible for around 53% of small business loans. Lending to small businesses calls for relationship skills: Unlike lending to large firms, there is seldom detailed credit information available. Lending decisions are often based on intangible qualities of borrowers.

While community banking is relationship lending at its very best, the pandemic is forcing change. Community bankers have been caught in the eye of the Covid-19 storm, providing lifesaving financial services to small businesses. They helped fuel the success of the Paycheck Protection Program, administering around 60% of total first wave loans, according to Forbes. This was no small feat: Community banks administered more loans in four weeks than the grup had in the previous 12 months.

However, as with many businesses, they have been forced to close their doors for extended periods and move many employees to remote arrangements. Customers have been forced to move to online channels, forming new banking habits. Community banks have risen to all these challenges.

But the pandemic has also shown how technology can augment relationship banking, increase customer engagement and drive revenue growth. Many community banks are doing things differently, acknowledging the need to do things in new ways to drive new revenues.

Even before Covid-19, disruptive forces were reshaping the global banking landscape. Customers have high expectations, and have become accustomed to engaging online and through mobile services. Technology innovators have redefined what’s possible; customers now expect recommendations based on their personal data and previous behavior. Many believe that engaging with their bank should be as easy as buying a book or travel ticket.

Turn Data into Insights, Rewards
While a nimble, human approach and personal service may offset a technical shortcoming in the short run, it cannot offset a growing technology debt and lack of innovation. Data is becoming  the universal driver of banking success. Community banks need to use data and analytics to find new opportunities.

Customer data, like spending habits, can be turned into business insights that empower banks to deliver services where and when they are most needed. Banks can also harness the power of data to anticipate customer life moments, such as a student loan, wedding or a home purchase.

Data can also drive a relevant reward program that improves the customer experience and increases the bank’s brand. Rewards reinforce desired customer behavior, boost loyalty and ultimately improve margins. For example, encouraging and rewarding additional debit transaction activity can drive fee income, while increasing core deposits improves lending margins.

The pandemic also highlights the primacy of digital transformation. With branches closed, banks need to find new ways to interact with customers. Digital services and digitalization allow customers to self-serve but also create opportunities to engage further, adding value with financial wellness products through upselling and cross-selling. In recent months, some community banks launched “video tellers” to offset closed branches. Although these features required investment, they are essential to drive new business and customers will expect these services to endure.

With the right digital infrastructure, possibilities are limited only by the imagination. But it’s useful to remember that today’s competitive advantage quickly becomes tomorrow’s banking baseline. Pre-pandemic, there was limited interest in online account opening; now it’s a crucial building block of an engaging digital experience. Banking has become a technology business — but technology works best with people. Community banks must invest in technologies to augment, deepen and expand profitable relationships.

Leverage Transformative Partnership
Technology driven transformation is never easy — but it’s a lot easier with an expert partner. With their loyal customers, trusted brands and their reputation for responsiveness, community banks start from a strong position, but they need to invest in a digital future. The right partner can help community banks transform to stay relevant, agile and profitable. Modern technologies can make banking more competitive and democratic to ensure community banks continue to compete with greater customer insights, relevant rewards programs and strong digital offerings.

When combined, these build on the customer service foundation at the core of community banking.

How Settlement Service Providers Help Banks with Surging Refinance Demand

Real estate lenders are racing against the clock to process the deluge of refinancing demand, driven by record-low interest rates and intense online competition.

Susan Falsetti, managing director of origination title and close at ServiceLink, discusses the challenges that real estate lenders are facing — and how they can address them.

What particular stressors are real estate lenders facing?
We’ve seen volume surge this year, but heavy volume is only part of the equation. Market volatility, job loss and forbearance are adding even more pressure. Meanwhile, the origination process is increasingly complicated, with the regulatory environment remaining an important factor. Amid all of this, many lenders have shifted to a remote work business model, forcing team members to grapple with additional caregiving and family complications.

How have market conditions affected lenders’ abilities to meet consumer expectations for closing timelines?
Some of our clients working with other providers have reported processes as simple as obtaining payoff demands and subordinations are causing delays. They’re telling us that, in some cases, these requests have gone from 24-hour turn times to 10-day turn times. Working with an efficient settlement service provider is essential, given that 75% of recent homebuyers in a Fannie Mae survey expect that it should take a month or less to get a mortgage.

What can lenders do to immediately reduce their timelines?
One way is by selecting the right settlement service partner, which can help them get to the closing table faster without making major changes to their process or tech investment. Settlement service providers should provide a runway to close, not contribute to a bottleneck. Examining or revisiting settlement service providers is low-hanging fruit for lenders looking to immediately deduct days from closing timelines.

What characteristics should lenders look for when making a settlement service provider selection?
Communication: Lenders should examine how they’re communicating with their settlement service provider. Is their provider integrated into their loan origination system or point-of-sale platform? Can they submit orders through a secure, auditable platform, or is email the only option? Regardless of how orders are submitted, lenders should also consider whether their provider has the resources to dedicate to communication and customer service, even in a high-volume environment.

Automation and digitization: Selecting a title provider with automation and digitization built into its processes can help lenders thrive, even as their volume fluctuates. The mortgage industry is cyclical; it’s essential that settlement service providers have the capacity to scale with their client banks and grow with their business. They should help banks manage their volume, without having to make dramatic process or technology changes.

Some providers can provide almost-instantaneous insight into the complexity of particular title orders through an automatic title search. This type of workflow helps both the lender and the provider. They both can quickly funnel the simplest orders through to the closing table while employing more-experienced team members to work on more-complicated loans.

Transparency: That kind of insight gives lenders extra transparency into their customers. When originators are aware of the complexity of a title early in the process, they can let their borrower know that the title is clear. If that’s the case, the consumer can stop shopping and leave the market.

Access to virtual closing solutions: Of course, the origination process doesn’t stop once a loan is clear to close. A survey recently conducted by Javelin Strategy & Research at the request of ServiceLink found that one of consumers’ chief complaints about the mortgage process was the number of physical forms that must be signed at closing. The survey also found that 79% expressed interest in using e-signatures specifically for mortgage applications. This interest in e-signings has evolved into genuine demand for virtual closings.

The right settlement service provider should help lenders to operate more efficiently and profitably. The key is identifying a partner with solutions to help banks thrive in today’s high-volume environment.

The Digitalization of Commercial Lending

Commercial lending is a balance of risk and reward.

When properly managed, this business line can be a bank’s profit leader. Part of that competitive edge is employing a digital strategy specifically tailored to match your bank’s commercial lending vision. No doubt your institution has shifted resources to more fully support digital banking in 2020 — not only to benefit your customers, but to address the challenges of staff operating remotely. Automation that was thought to be nice-to-have became critical infrastructure both to expedite loan origination and to efficiently manage the volume of loan servicing. The commercial loan life cycle is evolving, creating opportunities for digital improvement at all stages.

Simplifying applications. While the banking industry lacks a standard commercial lending application, it is possible to dramatically reduce the burdensome data collection exercise that banks have traditionally required of their business borrowers. Technology can create significant lift during this phase. Integrating credit policy data into the digital application and automating the retrieval of public data to reduce the number of fields an applicant must complete can reduce the time required to complete an application to minutes.

The democracy of automated underwriting. Automated underwriting used to be premier software intelligence harnessed by only the most enterprising of institutions. However, as the technology has become more commonplace and pricing models have moderated, institutions of all sizes can take advantage of efficiencies that can shave weeks off the process.

Dynamic documenting. One of the many risks associated with commercial lending is the accuracy, validity and enforceability of the loan documentation. Compliance solutions that are integrated with loan origination systems minimize duplicate data entry and render a complete and compliant commercial loan document package based on an institution’s criteria. This technology can significantly reduce human touchpoints, improving the speed and efficiency with which loan documentation is assembled.

E-signing and paperless transactions. If any single innovation has already transformed the lending experience, it is e-signing. Electronic signatures and electronic contracts were granted validity and legal effect through the passage of the Electronic Signatures in Global and National Commerce Act. It’s been 20 years since the act became law, but e-signing commercial loan documents and conducting commercial loan transactions electronically have only recently gained wider traction with institutions. It’s evolved into an expectation of some customers, expedited in no small part by the continuing coronavirus pandemic and related social distancing guidelines.

Generally, commercial loans that are unsecured or secured by personal property can be paperless and conducted electronically. Those secured by real estate, on the other hand, have traditionally required some wet ink signatures because of notarization and recording requirements. However, electronic and remote notarization in conjunction with electronic recording has increased the likelihood of completely electronic and paperless transactions.

Twenty-five states have passed laws authorizing remote notarizations, with another 23 states implementing emergency remote notarization procedures in response to the pandemic. While state requirements of remote notarization vary, this potentially allows commercial loan documentation signed electronically to be notarized online instead of requiring parties to be physically present in the same room.

Electronic recording is rapidly becoming the standard for real property documents, with more than 68% of U.S. counties now supporting e-recording. Documents with the recording stamp can be returned immediately after recording, speeding up delivery of the recorded documents to the title insurance company. Electronic recording also allows for the e-signing of real property documents instead of requiring wet ink signatures.

The increasing availability of e-signing and electronic and remote notary technology and resources means more institutions will be able to move entirely to or provide support for electronic and paperless commercial loan transactions.

Automation in servicing. Many traditionally manual processes associated with the review, servicing, tracking and maintenance of commercial loan transactions can be automated. For example, transactions often require parties to provide financial documents to the institution. Instead of manually entering those requirements into a spreadsheet and creating calendar reminders, institutions can leverage technology to automate reports and reminders for the financial document delivery requirements. Similar automated reminders and tracking can be used for collateral, compliance, document and policy issues and exceptions.

The effect of these digitalization opportunities — available at every step in the process, aggregated over your portfolio — can significantly accelerate your institution’s transition to a more touchless loan process.