The case for end-to-end digital lending

Illustration by Out of the box/Stocksy

Offering digital lending isn’t about the bells and whistles. It provides a real ROI, including increased efficiencies, more loan originations and a way to attract and retain customers. Community bankers tell us why.

By Beth Mattson-Teig

First State Bank & Trust in Williston, N.D., started developing its digital lending platform about three years ago—and the bank is really glad it did.

“I’m not sure how we would have processed all of the PPP loans and everything else in the last 18 months without some of the technology that we have implemented,” says Chris Jundt, senior vice president and chief lending officer at First State Bank & Trust. In early 2021, the $490 million-asset community bank launched its Finastra Consumerbot product, which offers online applications for consumer loans for items like boats and vehicles. In July, it launched a similar residential mortgage product, Mortgagebot.

“In order to stay competitive, we thought it was important to have various digital loan offerings available for our customers.”
—Chris Jundt, First State Bank & Trust

Community bankers are increasingly recognizing that the future of digital lending is here. Demand for digital banking products and services is on the rise across different geographic markets and customer demographics. “In order to stay competitive, we thought it was important to have various digital loan offerings available for our customers,” Jundt says.

Although First State Bank & Trust serves a relatively rural market in northwestern North Dakota, the community bank is seeing a younger demographic and even older customers who are becoming more comfortable with technology and like the convenience of digital loans. Whether it is 5 o’clock in the morning or at night, people want to be able to conduct various banking transactions from their computer or smartphone, including applying for loans, he says.

The pandemic accelerated the adoption of digital lending for both banks and consumers. “The transformation has been phenomenal,” says Prabhash Shrestha, ICBA group executive vice president and chief digital strategy officer. “Community banks have really propelled themselves into this journey in a fantastic way. Hands down, this is the future, and we are seeing a bigger move to digital lending across the industry.”

Cashing in on efficiencies

Many community banks have already invested heavily in digitizing their products and services, while others have been cautious to embrace digital lending for a variety of reasons. Like any business, community banks must look at the bottom line and the short- and long-term benefits. There will be expenses to put the technology and tools in place for digital lending, and banks need to compare those costs with the benefits to be gained in terms of increased efficiencies, more loan originations and the ability to retain and attract customers.

Northpointe Bank in Grand Rapids, Mich., began offering online applications nearly a decade ago and rolled out its custom online loan application tool in 2016. The $4.2 billion-asset community bank now relies heavily on those digital capabilities; 99.5% of its residential closed mortgage transactions use its online mobile app.

The bank’s primary reason for adding digital lending was to improve communication with its customers. “Without having digital lending capabilities, I think we would have a serious competitive disadvantage,” says Michael J. Winks, president, lending and retail banking at Northpointe Bank, which is an active mortgage lender in all 50 states.

Online applications help to improve the customer experience by offering convenience, secure communications and the ability to easily track the progress of loan applications. Banks also are realizing efficiencies from automation. For example, Northpointe Bank worked with vendors to add an automated income component to its digital mortgage platform in fall 2020 and an automated asset solution in March 2021. As a customer completes the mortgage application, they can link the loan application to bank accounts and pull asset information or link to income information.

“That piece has really helped with the efficiency of not only us processing the loan, but it really offers efficiency to our customer,” Winks says. The community bank’s early estimates show that automation cuts the speed in underwriting loans by half. So, an underwriter that was previously doing three loans in a day can now do six.

“There are efficiencies, especially for our workflow, with loan processors,” Jundt says. First State Bank & Trust now automatically issues compliance disclosures within its Consumerbot and Mortgagebot platforms. In addition, information from the online application flows over to the bank’s loan processing software, which requires less manual data entry to produce loan documents. The community bank also is in the process of moving to electronic image loan files, which creates added efficiencies for scanning and storing documents.

“We’re definitely moving toward an end-to-end solution that is very little paper involved,” Jundt says.

“We have taken a process that used to take 10 to 20 minutes down to seconds. That was really important to get that in place during the heat of the pandemic, when we were overrun with mortgage applications.”
—Harry Hayes, Clear Mountain Bank

Optimizing digital lending platforms

Community banks have been advancing digital lending for years, and most agree that building those platforms is an evolution as they move toward a fully end-to-end digital lending process. Clear Mountain Bank in Morgantown, W.Va., is something of a digital lending veteran, having been taking mortgage applications online since 2000.

Over the past two years, the $852 million-asset community bank has focused on enhancing its platform with a focus on optimizing for mobile. It has also added tools that help to more easily digest documents and that sync with different outlets to get items such as tax returns, pay stubs and bank statements.

“At the end of the day, that provides an overall better experience and a much quicker process,” says Harry Hayes, director and vice president of mortgage origination.

Previously, documents would be submitted and an employee would have to manually move those electronic documents to the bank’s document management system. Now, its system automatically moves and sorts those documents.

“So, we have taken a process that used to take 10 to 20 minutes down to seconds,” says Hayes. “That was really important to get that in place during the heat of the pandemic, when we were overrun with mortgage applications.”

In the past 18 months, Clear Mountain Bank has also enhanced its ability to take applications for consumer secured and unsecured loans on its website, such as vehicle and ATV loans, and is looking for a digital solution for its commercial lending products.

Looking ahead, community banks are exploring ways to incorporate artificial intelligence into digital lending to drive additional value for things such as improving underwriting, automating tasks and generating leads for cross-selling opportunities. Another common focus is overcoming challenges associated with integrating different solutions, such as getting a document management system that can work with the mortgage loan operating system.

“That’s where we have finally gotten in the last six to 12 months,” says Hayes, “where these systems are finally speaking with one another and are able to enhance our process and make things way more efficient.”

Bankers add personal touch to digital lending platforms

As community banks continue to embrace digital lending, many are struggling to figure out how to capture the benefits and efficiencies digital loans offer—without sacrificing personal relationships.

Bankers are finding different ways to connect with digital loan customers online and offline. “Definitely foot traffic within bank branches has been declining for many years,” says Chris Jundt, senior vice president and chief lending officer at First State Bank & Trust in Williston, N.D. “We see that within our market as well, and the COVID-19 pandemic has accelerated that decline.”

That, plus the introduction of online loan applications through the bank’s Consumerbot and Mortgagebot solutions, have prompted First State Bank & Trust to test mobility workforce platforms with its loan officers and customer service representatives. Bankers are equipped with tablets and laptops, and they can go to a customer’s home or place of business to answer questions or just introduce themselves, especially if it is a brand new relationship to the bank, Jundt says. “So, we are going more to the customer rather than the customer coming to the branch location,” he says.

The ability to maintain a personal touch was one of the key considerations for Clear Mountain Bank when it was trying to identify a vendor partner for its digital mortgage lending platform. What the bank found was a solution that automatically generates milestone updates that are sent to loan applicants and realtors that appear to be generated by the loan officer.

“I know that it does make a difference, because people are replying to those emails,” says Harry Hayes, director and vice president, mortgage origination at Clear Mountain Bank in Morgantown, W.Va. “[The emails are] an important way that we have been able to maintain the personal touch while gaining the efficiencies of automating those notifications and allowing that digital experience [for] the customer.”

Beth Mattson-Teig is a writer in Minnesota.

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