Navigating the Journey of Digital Transformation in Lending

Discover how financial institutions can implement digital transformation initiatives to meet modern borrowers' demands for convenient, online lending experiences.

May 31, 2024
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By now, financial institutions (FIs) have learned that digital transformation isn’t a one and done initiative. It’s an ongoing journey and strategic mindset that continually adapts to the latest offerings in the market and demands from consumers. In fact, 23 percent of banks and 27 percent of credit unions say they’ll never be done with their digital transformation strategy

While many FIs have done some form of digital transformation, it’s time to look at migrating borrower experiences online. Many of today’s borrowers grew up with digital skills and technologies, to the point where it’s basically second nature. Even members that didn’t grow up in the dot com era are highly accustomed to digital skills, with most folks doing some form of banking online. Yet, too many FIs may supply print-paperwork or require faxes or in-person documentation for lending and other banking processes. 

By integrating technology into your operations and fundamentally changing the way you deliver value to customers, you will stay one step ahead of your competitors. It starts with understanding what your consumers want most.

What do your consumers care most about?

When thinking about factors that influence decision-making, consumers care most about convenience, terms, institutions that inspire trust, and ability to monitor their banking situation online. On the flip side, only 1 in 4 consumers consider a nearby physical location influential in their decision.

Of course, different generations care about different things, and it's important to know what all your consumers care about at different stages in their lives. Older consumers put in-person experiences at a higher importance, while younger generations consider a simple, digital experience paramount—and may even consider a poor digital experience reason enough to find a different FI.

What do these insights mean for an FI’s digital transformation strategies? Institutions should reinvent their product set and rethink how they do business. At a time when borrowers’ financial lives have increasingly moved online, it’s time to provide streamlined, accessible, and secure digital products that offer greater convenience without sacrificing outstanding customer service.  Digital transformation initiatives should focus on simplifying the online experience for borrowers and lenders alike to make account opening, digital payments, and lending feel as easy as a FinTech.

How can digital transformation improve internal workflows?

Your core technology likely includes applications or software that has been sunset or run by providers that are no longer enhancing or supporting the technology. Coupled with your technical debt—legacy technology stacks, unused applications, and excessive infrastructure—some FIs may feel overwhelmed at the prospect of updating their technology.

But it’s a myth that digital transformation requires sprawling IT teams to handle coding, troubleshooting, and other technical challenges. It’s all in who you choose to partner with. Technology providers aren’t just third-party vendors—they’re strategic partners that can help you collect and review data on member behavior, do more with your existing workforces, drastically reduce time-to-close, increase ROI, and make lending processes easier and less disjointed. Selecting the right partners during your digital transformation initiatives can empower staff by minimizing repetitive manual efforts through automation, which offers them more space to focus on building relationships.

4 steps to implement digital transformation initiatives

Regardless of the digital transformation initiative you’re working on, the right approach will separate a successful implementation from a mediocre one. Every institution’s approach will look slightly different, but there are four general phases to walk through:

  1. Establish your strategy: From understanding your specific goals, desired outcomes, and alignment to greater company initiatives, any digital transformation project must start with clear goals and strategy.
  2. Start small: The more specific you can be in identifying a particular use case or problem you want to solve, the more successful your technology implementation will be. Make sure to think about KPIs and how you’ll succeed on a pilot test.
  3. Measure & monitor: Compare the KPIs with the technology implementation against your original baseline. Understand how well your team is adapting to any internal changes, and make sure to check in with how positively your customer base is reacting.
  4. Scale when you’re ready: Clear communication helps to manage cultural change and helps your team rally behind your cause. Prove the success of your pilot, and start scaling to broader aspects when you’re ready.

Throughout these four phases, it will be valuable to partner with a collaborative FinTech that aligns strategically with your organization to achieve your digital transformation goals. Our guide to FinTech partnerships provides tips on how to choose the right ones. Coviance can partner with you to automate manual lending processes and keep pace with consumer demand for digital services, while alleviating tedious work for lenders. 

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