Consolidation in the banking industry has had a profound impact on regional and community lenders. Over the past several years, customers have increasingly moved their borrowing business to the largest players in lending, expressing a preference for a purely digital experience that many smaller institutions have thus far been incapable of providing. Indeed, according to industry analysts, the global digital lending market—which was valued at $4.87 billion in 2020—is poised for explosive growth. Along the way, one thing has become abundantly clear. If you’re not one of the giants and you haven’t fully digitized your commercial lending processes, you’re leaving money on the table. Actually, on multiple tables, that can be found in virtually every nook and cranny of your business.

Re-examining Your Business Lending Growth Strategy

Why should you prioritize implementing and improving a fully digital lending experience? Loans typically account for more than 50% of a bank’s revenue and 40% of its assets. Currently, record-low interest rates are putting extra pressure on profits. As a financial institution dedicated to serving SMB customers, if your chief goals securing the business you do have and growing your company are your chief goals at the same time, responding to customers’ demand for a 100% digital lending solution should be a critical element of your strategy.

Bankers should expect that this pattern will be reflected in the small business market just as it’s already starting to appear in the consumer market. Hanging on to customers who grew up in the digital age will depend on providing them the self-service customer experience they’re comfortable with and accustomed to. And for those who are ready to acquire new customers, lending can be the channel that drives this growth. Digital lending platforms are the tip of the spear for the strategy of acquiring customers through lending relationships, which can lead to deeper and bigger engagements over time.

What’s more, consumers of financial services aren’t known for their loyalty. A 2020 survey by The Financial Brand found that the incidence of bank switching will only increase in the post-COVID financial services market. More than 20% of survey respondents reported that they expect to replace their primary banking relationship in the next year or two. The willingness to switch is even more pronounced among millennial and Gen Z customers: a study by FICO found that they’re two to three times more likely to jump ship. Hanging on to customers who grew up in the digital age will depend on providing them the self-service customer experience they’re comfortable with and accustomed to.

Financial Institutions Have Choices With Lending Platforms

Now that you know your institution needs one, what’s the best way to implement a digital lending platform that delivers both on your customers’ needs and your revenue and growth goals? You’ll likely need to approach the question by making one key decision first. You can choose to build your own digital lending solution from scratch or take advantage of a previously developed platform from a software company like Biz2X.

What type of financial institution is best suited to a homegrown system? Not to put too fine a point on it, but it will usually be one with bountiful resources. Large lending institutions, which initially led the movement towards digital loan processing, typically have ready cash on hand to invest in the heavy lifting involved in implementing a custom platform, especially one built from scratch. The process often starts by hiring a consultant to evaluate their lending processes, from loan origination and loan application to document management and decisioning processes. But typically, these consultants’ end product is strictly a white paper that outlines a production roadmap. The job of developing a digital lending solution that streamlines workflow and maximizes operational efficiency doesn’t just happen magically.

Large institutions are also better suited to a build-your-own solution because they either have the technical and project management resources in-house to bring their consultants’ proposals to life or they’re prepared to outsource the work to a team of developers dedicated to the project. They’re prepared to shoulder the cost of maintaining and amending their systems to meet new regulatory requirements. Cost overruns, delays, and regulatory issues aren’t uncommon when building a new platform from scratch. Larger companies often feel it can be worth the risk involved so they can develop something that at the end of they day they own fully.

But even for large commercial lending institutions, the build-your-own approach adds complexity to what otherwise could be a quicker, less expensive process than using a standardized platform. Launching on a standard platform can take as few as 30 days and, in many cases, you’ll know your total project costs before you begin. At Biz2X, for instance, we’ve helped lenders of all sizes reduce the cost of stepping up to meet today’s borrowers needs by providing a robust, end-to-end, cloud-based digital lending platform.

Borrow Insight from an Experienced SAS Provider

When you choose to rely on a standardized platform, you don’t need to be an expert in digital lending software yourself. ideally, you’ll benefit from your partner company’s expertise. Here’s a case in point—and you’ll forgive us if we tout our own capabilities for a moment. Biz2X’s digital lending platform is the product of Biz2Credit, the company that invented and continues to rely on the platform that Biz2X offers to financial institutions like yours. Since 2007, we’ve provided commercial mortgage loans, the full gamut of SBA financing options, merchant cash advances, term loans, and more totaling over $7 billion in originations. Offering our platform to other lenders was a natural offshoot of discovering that SMBs are underserved and that we’d developed a product that could benefit SMBs, lenders, and ourselves alike. There’s plenty of business out there for everyone. We aim to help commercial lenders like you take advantage of it.

When choosing a digital lending solution, it’s helpful to work with a company that has  been in the same boat as you’ve been in. What can that company’s experience mean to you? Plenty.

The Benefits of Buying Versus Building a Digital Loan Platform

We don’t have to tell you that commercial lending is complicated. For starters, your business depends on gathering, organizing, and analyzing mountains of data from borrowers and external resources alike. Well-designed loan origination software simplifies every aspect of data collection throughout the commercial loan lifecycle. It facilitates a fast, 100% digital application process—precisely what your customers are demanding right now. And almost invariably, it brings speed and efficiency to every step in the commercial lending process. Efficiency gains reported by companies that adopt standardized digital lending platforms are phenomenal. The majority double (and some even triple) their loan originations without the additional expense of hiring new employees.

Digital lending software centralizes the data you rely on to make lending decisions through a series of application program interfaces (APIs). The data lenders typically have to gather from such sources as Equifax, FICO, and other credit monitoring bureaus, UCC lien databases, and court records are baked into these comprehensive platforms. Digital loan origination software makes decisioning smarter and reduce risk.

It helps limit your exposure in other critical ways, too. The right platform will keep you in strict compliance with KYC and KYB regulations and provides the iron-clad data security tools you need to keep both regulators and customers happy. How important is security to your customers? Morning Consult, in a recent study of borrowers’ habits and mindset, discovered that customers were four times more likely to cite data security as an important consideration in their choice of banking partner. When you’re comparing platforms, look for one that directly addresses this concern. Check to see if it’s Certified SOC 2 and IS0 27001 compliant.

The right digital lending platform also streamlines CRM. Loan officers and borrowers can communicate inside the most robust platforms. The result is greater consistency in and less customer friction in your process. One of the greatest hurdles companies who try to build their own digital lending face is integrating their systems with such CRM products as Salesforce. The best SAS solutions make communicating with your customers more immediate and allows your team to be more responsive.

To Customize, Or To Configure: The Ultimate Question Lenders Face

One reason lenders frequently cite for building their own digital lending platform is that they need a solution customized to their unique needs—particularly one that integrates seamlessly with their existing back-office systems. They don’t want to throw out what’s working well for them. And let’s face it: it’s not unusual for businesses of all kinds to resist change.

But with the range of products available to you right now,  it’s not an either-or dilemma. You can choose a digital loan processing solution that doesn’t require abandoning legacy systems. Look for a solution that’s modular and affords you maximum flexibility—one that allows you to automate your process from end to end or select only those tools that address the specific bottlenecks that are holding you back. Be sure individual modules are configurable, too, and accommodate periodic reconfiguring so you can create your own rules engine, set own permissions, and adjust underwriting criteria. Ideally, a platform will allow you to adapt your decisioning process as your market changes, without incurring the cost of further customization

Take the Next Step

At Biz2X, we’ve had the opportunity to work with many financial institutions that chose to “go it alone” when they implemented their digital lending processes. Sometimes, it was the right decision and sometimes customers regret not selecting a ready-to-use product. Before designing our platform, we evaluated exactly how most lenders need to handle the key lending processes that drive their businesses. We continue to optimize the experience we offer. But we also are committed to offering objective advice to every customer we consult with. We invite you to explore all of your options with us, knowing you can rely on our experience and the obligation we feel to help you increase the profitability of every customer transaction. Knowledge. Insight. Our dedication to your success. That’s the Biz2X customer experience. Get to know us by scheduling a consultation today.