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(Updated) Are you Setting up Lending Fintechs / NBFC : Where to start? Part 4

Loan Origination System – Key Differentiator

Before the advent of Fintechs, Bankers primarily assumed that the entire customer onboarding journeys were handled manually. As a process, the loan documents were submitted via DSAs / Sales Team to Credit and Operations team for approval and disbursal. Even those banks that had implemented a decent loan origination platform did not use the optimized processes (old habits!).

With Fintechs focusing sharply on customer journeys, Loan Origination Platforms have become the center of Lending Business Model for Banks, NBFCs and MFIs. Indian ecosystem is now blessed with a large number of new LOS providers enabling Lenders to go digital.

At the core, LOS helps in simplifying lending journeys of customers through deep integration with customer channels and partner channels. The details of these channels were shared in our previous blog (Platforms – Think Client First).

To ensure that the lenders get complete customer data for KYC as well as Underwriting, the LOS platform should have deep integration with:

  • KYC data sources
  • Banking Data Sources
  • Credit Bureaus
  • Alternate Data Sources
  • Underwriting platform

Post approval, LOS platforms primarily handoff the customer and loan details to Loan Management System for disbursement and remaining journey of repayment and collections.

Basic expectations from LOS platform are

  • Should be able to handle atleast one of your business segments/products end to end.
    • Expecting a single platform for handling all retail and sme loans may not be feasible.
  • Should allow configuration rather than coding for building flows, products
  • Should come pre-integrated with key ecosystem data providers
  • Should come with extensive and usable APIs for integrating with customer platforms / partner platforms.
  • Should allow for easy integration with Underwriting platform as well as Loan Management System
  • Should be able to handle month-end / peak loads
  • Should have been validated from security perspective
  • Should come from decently sized startup/product company

Lenders also have an option to build their own LOS platform if they feel that their specific needs may not get handled by available LOS products. However, we recommend this only when there is deep product and engineering capabilities available with the lender.

We have seen the impact of implementing LOS platform as below:

  • Reduction in Customer Turnaround time by more than 50%
  • Increase in productivity levels by upwards of 30% across Sales, Credit, Ops
  • Reduction in Customer induced as well as Employee induced errors
  • Transparency in customer engagement
  • Better alignment amongst Sales, Credit and Ops
  • Significant decrease in Operations Costs

In the next blog, we will focus on another critical component – Underwriting Platform

To read the previous part of this blog Please click here

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