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 only require 30 minutes of actual work, moving information between physical locations such as a branch or 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 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 visit a physical branch. Filling out application forms delays the processing of the loan and eats away at loan officers’ time. 

2. Labor intensity for a lender

Although labor-intensive, the manual 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. Furthermore, the lender can ensure that regulatory requirements for documentation and KYC standards are being met. Finally, an in-person meeting allows the customer to discuss any unusual circumstances that might not be properly addressed by the application forms.

On the other hand, if the customer forgets any required documents, he or she must visit the branch again on a later date. In addition, if the loan officer discovers that the customer is wholly ineligible for a loan, both the loan officer and the customer’s time has been wasted. 

3. Data entry errors

Assuming, however, that the customer completes an application and meets all the necessary requirements for moving on, the next hurdle to 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

These steps take time and increase the risk of error or mis-entry. As the departments that handle verification and underwriting may be in different locations, and may even use a different local system, the number of handling and communication steps between the bank and the customer increases. Each added step increases the time and potential for error in the overall process.

4. Wasted time, analyzing fairly simple cases

Finally, the underwriting process, or the analysis of creditworthiness and the loan decision, takes additional time if done manually. Again, the manual consumer lending process is not without some advantages. Problems with applications that require human judgment to determine whether a loan should be approved 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 account for a majority 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 consumer lending can reduce the time needed to complete the processing of a loan file. For example, mobile and web-based applications allow a customer to digitally submit application forms and upload required documents, eliminating the need for a branch visit.


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

Through automation, any missing, incomplete, or unclear information can be instantly flagged by the system. This allows the customer to make an immediate correction and ensures that only complete applications are received by the bank. In the meantime, the loan origination officer can focus on more productive tasks, only turning to the incoming application once it is ready. Of course, customer engagement is still very important. However, in an age when consumers have become accustomed to online communications, a high level of personal engagement 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 automated consumer lending is more secure and efficient data management. When a customer submits an application, his or her information is automatically on-boarded into the system. That information becomes available to all parts of the process through a centralized database. In effect, 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. Cases that do not conform to preset standards are then flagged by the system for manual review. Thus, skilled underwriters are able to apply their experience and judgment to loan files that need them most.

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