Kabbage, the online financial technology company based in Atlanta, in a recent report which analyzes the lending behavior of 150,000 borrowers, came out with astounding facts:
- 17% small business loans get accessed on mobile.
- By the end of 2018, 20% of loans extended will be via a mobile device.
- Loan accessed on mobile between April 2014 to February 2018 increased by 360%.
- The total amount of dollars accessed on mobile between April 2014 to February 2018 grew by an astounding 1220%.
- The economic indicator, The Thomson Reuters/PayNet Small Business Lending Index, states that the SBLI for Nov’17 jumped from 4.1% to 138.7%.
Reflection on the trend
Two things which strongly come out of the report:
- Customers are adopting the mobile platform for borrowing.
- As a lender, you must understand this trend of the customer and act fast to stay ahead in the race.
Interest rates being where they are, the demand for new mortgages has been on the decline over the last 12-18 months. Add to this the increase in fixed costs because of changing compliance requirements and you will quickly realize why lenders are facing significant margin pressures. The only way out seems to be expansion in demand.
Expansion in demand can come by expansion in regions covered or expansion in terms of people reached. If lenders do this by old-age traditional methods, both involve huge costs and it will add to the already high fixed costs. If this can be done through the right technology, then it will make a lot of sense. Lenders need something different to continue attracting borrowers towards them.
The number of mobile phone users in the US has shown exponential growth in last more than 15 years, from 62.6million in 2010 to 224.3million in 2018. The predicted growth, as highlighted in a survey done by Statista, by 2022 is 270.66million. With the expansion in smartphones being used by consumers, wouldn’t it make sense if lenders allowed borrowers to manage the entire loan application process on their mobile phones?
Mobile-based apps for lending are fast turning out to be a boon for lenders, so much so that it will be difficult for a lending house to survive in the market without them for long.
Why do Borrowers Love the Mobile Experience?
A borrower loves to experience the mobile route to apply for mortgage for the following obvious reasons:
- The mobile app for lending is user-friendly.
- The mobile-based originations iseasy to access, even while on the go.
- They skip the traditional need of standing or waiting in the long queue at physical locations.
- Mortgage approvals and disbursals are faster, as to &fro documentation happens much faster.
What is in Store for Lenders in the Mobile Route?
The borrower gets superior overall experience, desired platform, and convenience of all notifications related to his application. The focal point is- What is in store for the lender?
Following are a few good reasons to have a Mobile app for lending.
A. Document Validation Made Effortless
The lender gets a cost-effective solution, as technology simplifies the pre-qualification processes. In place of hiring a team to complete the documentation of borrowers, verifying them, collating them, analyzing them, processing the application, mobile-based originations are simpler for borrowers as well as lenders.
They can cut down the paperwork man-hours, improve the documentation accuracy, save time, and still be cost-effective and fast.
B. Faster Communication and Shorter Time to Close
The self-service feature of a mobile mortgage app allows the borrower to not only check and decide on the offered feature of the platform on the go, but also facilitates them to click pictures of required documents, and send it across for approvals. Half of the lenders’ job is done and hence, they can close as soon as possible.
In addition, the mobile app penetration is deep by virtue of the use of smartphones. The borrower need not search the nearest branch and go through a tiring process. At the same time, the lender need not be present at every location to attract or acquire customers.
C. Process Integration for Better, Faster, and Effective Coordination between Functions
In a brick and mortar office of a mortgage lender, different functions like the documentation collection team, verifying team, the underwriters, and the back-office team must seamlessly coordinate to close the application in a step by step process. All this takes time, cost, and manpower.
The advantage for a lender to have a mobile app for lending is that the lender can integrate everything on the “Loan Origination System” and still remain accurate and quick. Optical Character Recognition Systems can be used to scan, scrap, and update documents in the LOS.
D. Ideal Medium to Influence Customers for Acquisition, Branding, and Exposure
Here’s an interesting fact – The average time spent by today’s customer on mobile is around 2 hours and 51 minutes per day.This gives the lenders the best time to promote their products and services. They can use this time to offer schemes or discounts, and also resolve their queries or doubts.
All the above can enhance the brand recall for the lender and strengthen their market value.
No doubt mobile app for lending is the need of the hour for both the borrowers as well as the lenders. The fast-paced, competitive ecosystem demands lenders to adopt technology and stay ahead in the race.
The sooner mortgage lenders providers adopt this technology, the sooner they will be able to gain traction and competitive advantage in the already competitive market. Simply focusing on reducing costs can no longer be sufficient. Today’s customers need more than that: they want a superior all round experience.
At Visionet, with our mobile app, LoanVelocity, we aim to simplify things for the lender and enable him to reach larger number of borrowers. More details about our product here
Alok Bansal is Managing Director of Visionet Systems Inc. and has 21 years of experience in managing strategy and global BPO operations. He excels in optimizing and leading the growth of financial services companies who are looking to take their mortgage operations to the next level.