The surging popularity in members’ use of online lending applications
is causing increasing numbers of credit unions to take a closer look at this
trend. While members enjoy the benefits of increased convenience, credit unions
are reporting exciting improvements in their own performance and efficiency.
By offering an online lending solution, credit unions can increase the speed
of processing a loan application, improve quality and consistency of decisioning,
and decrease staff involvement. Credit unions are streamlining processes in
order to meet the challenges of growing loan volumes, compete more effectively
with other financial institutions and online lenders, and enter new markets
According to the Aug. 16 Callahan & Associates article, “What are
Credit Union Spending Priorities for the Online Channel,” the demand for
online consumer lending is growing. The article summarized the results from
a survey of credit unions to identify information technology (IT) spending priorities.
Sixty-nine percent of respondents – the largest percentage in the survey
– responded that investing in online consumer loan decisioning software
is a strong priority. Fourteen percent of the credit unions surveyed have evaluated
or are evaluating online mortgage decisioning software this year.
Data shows that members are moving more aggressively to the online channel.
According to Forrester Research, 41 percent of members research their next financial
service purchase online, compared to 52 percent who research their purchases
through the branch. As members continue to shift toward utilizing online services,
it is becoming increasingly important that credit unions continue to develop
their online offerings.
Tropical Financial Credit Union (Tropical) in Miami, Fla., recognized this
trend early and took advantage of the opportunity. In June 2002, Tropical’s
executive management team began evaluating an update to the credit union’s
consumer lending system. Tropical chose a credit union industry-developed solution
with a streamlined online application process. Tropical enhanced the system
to offer automated decisioning and provide members the option to close their
loan remotely or in the branch.
Jim Wagy, senior vice president, member services at Tropical said, “The
volume of remotely closed loans has dramatically changed the way we do business.
We went from closing 13 percent of loans remotely in 2003 to 58 percent in 2004.
And we have experienced a 58 percent increase in consumer loan volume through
August 2004, compared to the same period in 2003.”
Tropical also found that moving to the MemberBridgeÒ online loan origination
solution greatly decreased overall loan processing time. MemberBridge is an
electronic services platform and translation gateway that supports a variety
of software applications such as online lending, electronic bill payment and
online funds transfer.
On Tropical’s old system, the average time for processing a loan was
one hour and 45 minutes. Based on Tropical’s analysis, online loan applications
can now be processed, disbursed and closed in as little as 35 minutes with the
MemberBridge online loan solution.
The increase in loan volumes and decrease in time to originate and process
a loan have translated into increased revenue and cost savings for the credit
union. Tropical was able to reallocate 11.5 employee positions due to the conversion,
which contributed to a savings of nearly $478,000 in the first year.
Online lending solutions are not all created equal. It is critical that a credit
union select a flexible solution that integrates seamlessly with both existing
online offerings and the credit union’s data processor. An effective online
lending application also allows information to flow directly from the online
loan application through the credit scoring and risk-management systems, and
back into the credit union’s host system, without manual intervention.
The table below outlines some of the key differences between manual and online
loan application processing..
Manual loan application processing
Online loan application processing
|A paper-intensive approach for the member and
the credit union that can introduce errors due to manual entry.
||The same online application process can be utilized, regardless of method
by which the data is obtained (in branch by staff, completed online by the
member, or taken over the telephone by the credit union contact center).
Opportunities for data entry errors are decreased and quality of the data
being collected is improved
|A manual process is required to request credit
scoring from agencies.
|| The online loan platform facilitates automated access of
credit scores from credit agencies.
|Applications and paperwork are passed to various
departments for approval. Decisioning tends to be subjective.
||The approval process is streamlined and consistent evaluation criteria
applied. Workflow management is automated with a complete audit trail.
It is critical for credit unions to take advantage of efficiencies and increased
member service whenever available. Online lending applications allow the credit
union to increase the speed of processing an application, improve quality and
consistency of decisioning, and improve staff productivity. These benefits,
coupled with the growing number of members using online products, are driving
credit unions to more strongly consider online loan solutions. For more information,
please contact your corporate credit union, call Cheryl Harris, national sales
director, at (888) 656-4050, ext. 6027, or visit www.memberstreet.com.