5 Trends Shaping the Future of Member Business Lending

June 2018: Vol 41 No 6
Mark Messick
Leveraging these advancements can strengthen the relationship between CU and borrower.
two businessmen working on a marketing plan over a laptop that displays “Loan Approved”

Many credit unions prioritize the digital optimization of their retail experience, but they cannot disregard the channels critical to business member engagement—particularly member business lending. As the CU industry continues to advance its share of the commercial loan market, there are five emerging trends to watch that are likely to reshape member business lending in the next year. While these trends are driven by technology, their impact goes beyond simply offering more agile, efficient processes and extends to actually bettering the communication and relationships between lender and member.  

The Death of Data Silos
Credit unions often have all of the information needed for member business lending but fall short in the organization and mining of this data, creating inefficiencies and roadblocks in their back office. Traditionally, the data used to originate, book and monitor commercial loan activity is placed in separate silos—stored partly in the loan origination system, while other pieces are housed everywhere from the core, a document platform, financial spreadsheet software or Excel. This process leaves credit unions with a high degree of manual work and greater probability of human error. Fortunately, today’s advancements in application program interfaces can reduce the barriers between those disparate silos, creating a more comprehensive and intuitive integration of the data. A well-designed integration strategy not only enables credit unions to declutter member data, but also allows CUs to better anticipate members’ financial needs through more efficient and simplified communication, ultimately improving the entire loan process. 

A Shift to Continuous Virtual Underwriting 
Current lending processes largely involve difficult applications and long wait times, sometimes preventing new loan relationships from happening at all. Data integration lays the foundation for enhanced loan origination, enabling application systems to naturally communicate with and connect to back-office technology to get the deal done. This, paired with advancements allowing borrowers to securely update financial records electronically, moves the industry toward continuous virtual underwriting. As data is updated, it can merge into a running historical spread to speed response times on both new loan requests and line-of-credit increases. 

Predictive Analytics Find Their Place
With continuous virtual underwriting, credit unions can better anticipate upcoming loan requests based on the financial status and health of the borrower. Going a step further to achieve true predictive qualities, credit unions can factor in external events—like industry economics—that may impact the borrower’s performance or needs. This extent of predictive analysis has clear benefits to credit monitoring, but also gives credit unions meaningful insights to grow portfolios among their existing member base. Having a better understanding of specific member needs strengthens lenders’ targeted outreach for new loan opportunities and builds member loyalty. 

Mobile Takes the Lead
The advancement and proliferation of mobile services has dominated banking innovation in recent memory and is finally making a noticeable push into commercial lending. And, it goes beyond the front-end borrower application. Lenders are gaining access to tools that allow them to track loan participations or initiate activities from the field—whether that be managing an inspection report or approving a draw request from the borrower. This type of on-the-go functionality radically changes how a lender can interact with the borrower, gauge the status of a loan or the entire portfolio, and collaborate with others involved in the deal.

UIs Become More Interactive
A robust user interface is one of the most important factors of today’s lending experience. Data integration makes an interactive UI possible, particularly through the use of custom dashboards. By seeing up-to-date pipelines, active sales goals, outstanding requests, pending tasks, upcoming renewals, statistics on portfolio health, etc., lenders change how they interact with loan systems and apply data for borrower communication or decision-making. Similarly, members will change how they interact with the credit union, as mobile gateways can create efficient, meaningful dialogue that keep the institution and borrower connected and informed.

Credit unions make ideal partners for business borrowers and should treat member business lending as circular, or ongoing, and not as a simple, linear “end-to-end” process. Being aware of and embracing the aforementioned trends can only strengthen credit unions’ chances to successfully compete for members’ loans and loyalty—not just for the lifecycle of one deal, but for the lifetime of the business.

Mark Messick is director of products for ProfitStars Lending Solutions. ProfitStars, headquartered in Allen, Texas, is a division of Jack Henry & Associates.