Spotlighting Online Lending

The rising popularity of online lending among members is leading credit unions to recognize the many benefits of implementing such a program.




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 more cost-effectively.

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


Oct. 4, 2004


  • Very nice. Steve French - Wescom Resources Group
  • I really liked it