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Five Aspects of an Ideal Loan Origination Solution

New technologies and tools are quickly cropping up to facilitate lending and account opening.

We have pulled together five most important capabilities of a lending system to help you identify the most appropriate solution for loan origination.

1. Intuitive management of loan processing business flow.

Visual editor for decision flow is one of the most important elements of the lending system. Ideal LOS should not require any programming knowledge to set up and adjust business flow. 

If you are willing to maximize your tech investments, it’s better to select a solution able to combine multiple decisioning strategies. Such solution will let you easily adapt to market and regulatory changes, and implement self-learning approach through Champion/Challenger testing.

2. Smart integration with the third party data

  “There’s always more information out there,” – according to Google company statement.

You must be able to evaluate borrowers using their multi-dimensional profile, and you must ensure highest accuracy of this profile. Thus, it’s essential for LOS to not only flawlessly integrate alternative data, but to implement data verification. 

John Thiel, Managing Director at Lynch has summed it up perfectly in his recent interview to Forbes: “Big data provides comprehensive insight that helps us narrow down the questions we need to ask and also dispute some conventional wisdom that gets proclaimed in our industry…But a very important point to consider, especially as data takes on a more significant role, is that we must ensure that data is verified.”

3. Inclusion of scoring models

As Gregory Piatetsky, a leading data mining expert and KDnuggets editor, says, one of the top challenges to be solved by decision automation systems in 2013 is “balancing accuracy which frequently requires advanced, black-box methods, and transparency, which requires methods to be understandable and explainable.” 

You must be able to enhance every decision with data insights gained through scoring models. It is also very important that LOS provides a dedicated interface and toolset for scoring models validation and maintenance. 

4. Data modeling capabilities

Even if regulation does not require you to incorporate in-house scoring, custom scoring models will help you gain an information advantage over your competitors. 

A lot of large banks are using alternative data for their own valuations and custom credit scoring models, as confirmed in the American Banker’s article 10 Big Ideas for Banking in 2013 by Craig Focardi, Senior Research Director of Consumer Finance at CEB TowerGroup.

5. Right balance of automated actions and experts’ opinions

Lenders often need to incorporate experts’ understanding and assessments into loan application processing flow. To ensure highest productivity of the LOS, you must be thoughtful about the way that automated actions are augmented with human intelligence.

James Taylor, a leading consultant in Decision Management, suggests setting up automated decisioning systems in such a way, that they would not simply pass the initiative to humans to handle uncertain or ambiguous situations: “They should optimize human workload, provide human participants with all that is necessary for taking informed decisions, and be ready to 'take back' transactions if automation becomes possible again due to a change.”

These are the most important capabilities of decision automation platform for lenders. Never forget that no matter the maturity of your business or economic environment you can always simplify and improve your lending with decision automation technologies. As Renaud Laplanche, CEO of Lending Club, wrote in his article for CNN, “technology enables new opportunities for those who are nimble, and presents a substantial threat to those who are slow to embrace change.”


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