The creditworthiness of applicants in the digital channel is statistically less than a traditional delivery model, with anywhere between 50% and 90% of the credit requests not being viable opportunities. Increased volume coupled with lower borrower credit quality results in an untenable flow of requests, making digital lending viability questionable when using traditional credit processes.
In today’s banking landscape, an updated credit underwriting model is necessary to manage digital credit processing costs for existing customers and prospects. Banks should consider using a multi-stage application process to filter out non-opportunity applicants from ones with desired risk profiles. This assessment can be based on factors such as credit grade, geographic misalignment, and analytically identified fraudulent intentions. Automation-driven models offer early-stage checks for OFAC, charge-offs, fraud, age, and address validation. This type of model might also offer a full credit bureau check for major derogatory tradeline. Applications that fail loan policy of business rules are automatically declined.
Additionally, institutions can improve success by processing digital loan applications through intelligent decisioning for data quality validation, disclosures, pre-bureau checks, post-bureau checks, compliance, credit scoring, ration analysis, business rules, policy, and segmentation before assigning them to human capital for intervention. This increases efficiency, minimizes labor and vendor costs, mitigates credit risk, strengthens customer engagement, and ensures regulatory compliance.
Using this process allows lenders to focus on meeting needs and providing guidance for more qualified applicants with near-term relationships and revenue potential. It also offers digital referrals for unqualified applicants to appropriate advisory service resources in areas like credit counseling and budgeting to help improve their overall economic well-being and build relationships for future loan requests once qualified.
For more information, download the Automating Consumer Lending Across Omni Delivery Channels interview brief.
