4 Challenges of Manual Consumer Lending and How Automation Solves Them

4 Challenges of Manual Consumer Lending and How Automation Solves Them

In Featured, Underwriting Automation by Yulia GnatyukLeave a Comment

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4 Challenges of Manual Consumer Lending and How Automation Solves Them

Consumer lending traditionally involves several manual processes that greatly increase the time needed to complete a loan transaction. Even though most consumer loans may only require 30 minutes of actual work, moving information from one step to the next, often between separate physical locations such as a branch and a main office, can add hours or even days to the process.

Intensifying competition from non-traditional lenders and even between conventional lenders such as banks and credit unions is being driven by growing customer demand for greater convenience and speed. To answer this demand, consumer lenders are increasingly turning to automation to improve efficiency, productivity, and customer satisfaction.

4 Challenges of Manual Consumer Lending

4 Challenges of Manual Consumer Lending and How Automation Solves Them
1. Necessity for a borrower to visit the branch

For many lenders and their customers, the loan process begins with a hurdle, the necessity for the customer to make a personal visit to a branch to apply for a loan. Filling up application forms takes time, delaying the start of processing while keeping a loan officer engaged.

2. Labor intensity for a lender

Although it is labor-intensive, the in-person application process is not entirely without value. It does allow the loan origination officer to conduct an initial check of whether all the required information has been supplied, and it is a reasonably easy way for the lender to ensure that regulatory requirements for documentation and KYC standards are being met. It also provides the loan officer and the customer an opportunity to discuss any unusual circumstances that might not be properly addressed by the application forms.

On the other hand, if the customer has forgotten some required documents, another visit to the branch will be necessary. If the loan officer discovers that the customer is wholly ineligible for a loan, a certain amount of time has just been unproductively lost.

3. Data entry errors

Assuming, however, that the customer has made a complete application that meets the requirements for moving on to the next steps in the process, the next hurdle to be overcome is data management.

The loan origination officer will need to follow at least these steps:

  • Enter the customer’s information into the bank’s system
  • Upload or enter information from supporting documents
  • Alert the personnel conducting the verification and underwriting processes that a new application has been received

This all takes time and increases the risk of error from mis-entries. As the departments handling verification and underwriting may be in a completely different location, and may even be using a different local system, extra handling steps and extra communication steps between the bank and the customer are added, each one adding time and potential for error to the overall process.

4. Wasted time, analyzing fairly simple cases

Finally, the underwriting process itself, the analysis of creditworthiness and the loan decision, takes additional time if done manually, using tools such as spreadsheets. Again, the manual process is not without some advantages. Problems with applications that require human judgment to determine whether a loan should be approved or not can be addressed on the spot. However, the manual process means that underwriters spend nearly as much time on normal, unproblematic loan files – which for most lenders probably account for the largest proportion of underwriting volume – as they do on those that require extra attention.

How Automation Solves These Challenges

4 Challenges of Manual Consumer Lending and How Automation Solves Them
1. Convenience for the borrower

Automated loan processing can reduce the time needed to complete the processing of a loan file beginning with the application process. Mobile and web-based applications that allow a customer to digitally submit application forms and upload required documents eliminate the need for a branch visit, making it more convenient for the customer.


Mobile apps can help improve data collection and security, centralize information and seamlessly integrate within lender’s existing system. Read about mobile apps for lending in MonJa’s blog.

2. Instant borrower notification on missing information

Any missing, incomplete, or unclear information can be instantly flagged by the system, allowing the customer to make an immediate correction and ensuring that only complete applications are received by the bank. In the meantime, the loan origination officer can be focused on more productive tasks, only turning to the incoming application once it is ready. Of course, customer engagement is still very important, but in an age when consumers have become accustomed to online communications, the “personal touch” can still be provided through the loan application portal.


How to Create the Ideal Millennial Bank? Read in this article.

3. Secure and efficient data management

The biggest advantage of automating the process from the beginning is in more secure and efficient data management. When the customer makes the application, his information is automatically on-boarded into the system and is available through a centralized database to all parts of the process. This allows the subsequent verification and underwriting processes to begin immediately.

4. Underwriter’s time is allocated towards most complex application

In terms of risk management, the automated underwriting system allows for customized credit rules to be installed and continuously updated through machine learning. This means that the majority of fairly straightforward applications can be handled entirely automatically, with the ones not fitting preset standards flagged by the system for manual review. Thus, skilled underwriters’ time is used most productively – applying their experience and judgment to loan files that need them most.

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