Despite new pushes toward digital transformations, many financial institutions continue to use manual lending processes that add costs, create delays, and make their staff work harder than they must, according to a new survey by Abrigo, the leading technology provider of compliance, credit risk, and lending solutions for community financial institutions.
Abrigo surveyed nearly 250 lenders, credit analysts, chief credit officers, chief risk officers, and other professionals involved in lending and credit risk at banks and credit unions in an online survey between Feb. 18 and March 23, 2021. While the pandemic and related events created many challenges for community financial institutions, it also led to new opportunities and rewarded innovative thinking.
According to respondents, more than half of financial institutions represented in the Abrigo 2021 Business Lending Process Survey have accelerated their digital transformation plans due to the pandemic and related events. The environment also drove a renewed emphasis on finding efficiencies in the lending process, said 48% of respondents. One reason for this emphasis on creating efficiencies may be attributed to a heightened demand for financial services, such as Paycheck Protection Program loans. Nearly one in three respondents reported growth in the customer or member base.
Despite the digital push spurred by the pandemic, many bankers reported institutional challenges that commonly hurt lenders’ ability to drive loan growth, manage credit risk, and satisfy customers or members. Even amid the remote, physical distancing environment of 2020, only one of every three respondents in Abrigo’s survey said their institution currently offers the ability to apply online for a commercial loan. That is higher than the 20% who offered online loan applications in Abrigo’s 2020 survey. However, 13% of respondents said their institution doesn’t offer or plan to offer online loan applications in the future.
Abrigo surveyed nearly 250 lenders, credit analysts, chief credit officers, chief risk officers, and other professionals involved in lending and credit risk at banks and credit unions in an online survey between Feb. 18 and March 23, 2021. While the pandemic and related events created many challenges for community financial institutions, it also led to new opportunities and rewarded innovative thinking.
While community financial institutions recognize the value of digital transformation, the results gleaned from the survey show that there is significant room for improvement for more efficiency, automation, and reduction in manual processes. Among the findings:
- 46% said their financial institutions take at least five weeks to close a commercial loan. That figure includes many institutions (16% of respondents) requiring eight weeks or more.
- Entering the same data repeatedly was cited as the largest obstacle in the commercial lending process by 35%. Nearly two-thirds of respondents said their financial institution re-enters the same data point for a loan in another field or system up to five times, and one in four reported entering the data at least six times.
- 33% said gathering documents efficiently and consistently is the largest obstacle in their institution’s commercial lending process. This was also the most frequently identified top obstacle from respondents in Abrigo’s 2020 survey.
- Asked about their biggest headache related to ticklers, the documents required for every loan file, 65% of respondents said it is tracking and following up on missing items. Only 17% of respondents said their institution uses automation for ticklers.
“Process automation is incredibly important in today’s lending environment,” said Brandon Quinones, Abrigo’s Director of Client Education. “Speed and consistency will make or break a deal, so putting a system in place to drive that automation — enabling financial institutions to spend less time on redundant data entry or requests and more time on value-add activities — is something industry leaders recognize as no longer just an option for their business.”
In addition to gauging the current state of digitalization and automation within financial institutions’ business lending processes, the Abrigo survey also assessed how banks and credit unions are approaching other areas of business lending, including pricing loans, assigning credit risk, and growing their portfolio.
“Financial institutions over the last year have faced unprecedented challenges trying to get capital to their communities — from ramping up for the Paycheck Protection Program to monitoring credit risks,” said Jay Blandford, President of Abrigo. “Our survey shows the day-to-day obstacles many community financial institutions deal with daily. Technology has made it easier for many of their borrowers to apply, but many lenders are still using a largely manual process for business loans.”
The 2021 Business Lending Process Survey results highlight the importance of institutions finding ways to overcome inefficiencies and inconsistencies to scale loan growth and manage risk. To learn more about Abrigo’s 2021 Business Lending Process Survey, download the infographic, “The 2021 Business Lending Process Survey.” For the complete data set and results, please reach out to press@abrigo.com.
About the survey
Abrigo asked 23 questions in an online survey from Feb. 18-March 23, 2021, to help financial institutions benchmark many of their commercial or business lending processes. The survey was made available to Abrigo customers and noncustomers, who were offered the chance to see survey results once completed and a chance to win a limited number of Starbucks gift cards. While not necessarily representative of the entire universe of U.S. financial institutions, the sample provides a detailed look at challenges faced by a large number of lending and credit professionals.
About Abrigo
Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo’s platform centralizes the institution’s data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth. Make Big Things Happen. Get started at abrigo.com.
