The Need for Agility and Consistent Innovation in Lending


Low growth rates, rising costs and increasing regulation are creating a challenging landscape for financial institutions. To be successful against such odds, banks need to increase revenues, an area where lending plays a vital role.

Unfortunately, too many financial institutions are missing out on the opportunity to expand share of wallet through lending products as consumers turn to alternatives, such as online lenders. Globally, 40 percent of recently surveyed consumers believe that non-bank lenders can better facilitate their needs, and 30 percent of consumers who have had no experience with an online bank are open to trying one.[i]

Consumer interest is propelling market growth. The online lending market is anticipated to register a CAGR of over 11 percent between 2020 and 2025, but traditional banks and credit unions have already seen the impact.

For example, Business Insider Intelligence’s Online Mortgage Lending Report reveals that the top five U.S. banks dominated 50 percent of the mortgage market in 2011, but their share of the market had dropped to 21 percent by 2020, thanks in part to the rising proliferation of online lenders.

Given the advancement of digitally inspired new market entrants, fewer than 20 percent of banking executives feel prepared for the future, and more than half view non-traditional players as a threat.

In thinking this way, financial institution executives are missing one important fact: Banks know their customers better than anyone, and through continuous digital interactions, learn more every day. By putting those insights to use and adopting the capabilities that consumers want to utilize, banks can develop an agile innovation strategy designed to increase lending market share.

Improving market penetration by taking a platform approach to lending

Fortunately, the advent of platforms and APIs are opening financial institutions up to innovation, by providing easy access to the capabilities they need to remain competitive against new online entrants and non-traditional methods of financing. Listen to Finastra’s webinar, Digitalization Journey: Fixing the Loan Documentation Headache, where a community bank tells the story of utilizing the financial services ecosystem to move ahead of the competition.

APIs allow a world of third-party innovations to unite on a single platform in a marketplace ecosystem. Ecosystems allow financial institutions to adopt the products they need to compete in lending. Data analytics, for example, offers a game changer for financial institutions, mining insights from internal and external sources, to inform marketing strategies, speed credit decisioning and enhance the overall lending process.

With targeted information in hand, banks  can track lifestyle changes, among other consumer trends, on a personal basis, and then reach out to the customer when lending products are needed. Once a consumer applies for a loan, big data analytics in conjunction with technologies such as artificial intelligence and machine learning, streamline the decisioning and underwriting processes, bringing the speed and efficiency of the online lender to the traditional financial institution.

Since APIs simplify data transfer between platform participants and connected financial institutions, it’s also easy to see how current lending products are meeting customer needs and to identify opportunities where the bank or credit union may enter alternative lending streams, such as point of sale solutions. Once needs are identified, the open nature of the ecosystem also makes it easy for the financial institution to implement products to add these new capabilities.

Of course, insights are also vital to improving the customer journey and guiding innovation strategies, such as when and where to digitize current processes. In today’s environment, most consumers prefer to apply for loans online.

Online origination has become one of the biggest differentiators for financial institutions, and platforms are now making it possible to connect loan origination with deposit account openings, providing a consistent user experience and better access to data. Solutions like Finastra’s Fusion Originate make this possible.

Platform ecosystems make it feasible for financial institutions to digitize the end-to-end lending process, by adopting the products necessary to streamline workflows, automate tasks and meet consumer experience standards. Consumers can apply for loans online, easily upload documents, and even submit electronic signatures.

Financial institutions, on the other hand, improve back-office functions and facilitate faster workflows, reducing turnaround times and costs associated with loan processing.

In the end, banks can evolve to the same level of digital integration used by challenger online lenders and new technology market entrants, realizing even greater rewards in customer satisfaction by building long-term sustainable relationships.

Transformation in commercial and consumer lending is happening now. View more resources on how you can prepare at

[i] Alicia Phaneuf. “A Look at Nonbank Loans and the Alternative Lending Industry Business Model in 2021.” Business Insider, Jan. 15, 2021. Web.