Making a loan is called origination, and it is typically a drawn-out process that needs the lender to assess the risk posed by the borrower, negotiate the loan’s terms, and decide on a loan amount.

The loan process used to be especially cumbersome as there used to be multiple documents to fill in with requisite application information. All these documents then had to be processed and approved manually through the steps to approval.

These steps included checking the information on application documents for veracity, determining precise income and expenditure, determining correct time frames at residences, estimating the best values of assets and liabilities, assessing risk against individual credit criteria and matching them with paper underwriting charts, and more. These processes and legacy systems relied heavily on manual decision-making – delaying approvals by days, if not weeks.

A new way

Fortunately, all of the above steps have been consigned to history. Modern origination processes are, on the whole, based on automated processes that rely on specially written software that begins with a digital application form, which then goes through all the steps mentioned above in an automated format that can give preliminary approvals for loans in minutes.

With the advent of digital origination in the loan and lease industries, asset finance providers can now serve consumers more affordably and quickly, increasing the competitiveness and agility of their operations.

According to Ian Nelson, managing director EMEA at Q2, a provider of digital banking and lending solutions to a broad range of finance firms, “high-functioning origination capabilities are all about client experience.” In the modern world, clients are expecting that Amazon-style design experience. When they go on the internet to order anything, it just gets delivered. They want that instant service.”

It is, says Nelson, all about “being able to deliver in a flexible way because the origination capabilities of a company can change all the time. They ask us how to raise new products in an easy and cost-efficient way, how to compress the time to decision and time to cash. They want to automate as much [of the process] as they can, so they make quicker and better decisions, and onboard their customers quickly.”

Post financial crisis

After the financial crisis of 2007, when many banks reduced their lending to small to medium-sized firms (SMEs) due to non-performing loans, the non-bank lending market increased dramatically.

For SMEs and individuals who need access to financing, asset finance companies are an essential resource. Fintech-enabled alternative funding can fill the gaps in a financial system that is more modern, automated, intelligent, and collaborative.

Asset finance businesses increase speed, efficiency, and, most importantly, attract clients with the right technological infrastructure – everything that the modern marketplace and digital economy need.

Open Banking

By requiring banks to exchange data electronically with third parties via an application programming interface (API) with the owner’s consent, the implementation of Open Banking in 2018 allowed financial service providers to develop new products and services.

Asset finance firms may now offer much more individualised and customer-focused services thanks to open banking and cutting-edge technology such as data analytics and artificial intelligence.

Faster application choices because of the elimination of paper-based processes mean more time for improved customer relationship management and assistance. Additionally, since all necessary information is provided, customers have a higher chance of being accepted.

The same finance and operational issues now beset SMEs and people, just as loans dried up during the 2007 financial crisis as a result of banks becoming much more cautious about who they would assist. As a result, they require substitute service providers who can explore the market for funding sources using the newest technological techniques.

“There are various types of organisations in the market that can range from a bank-backed asset finance department to independent asset finance companies that just purely do finance for client firms and individuals. Then there are product manufacturers and service providers that have their own in-house asset finance arms,” adds Nelson.

“It’s a way of non-banking financing where you lend money by securing loans against assets purchased to allow private individuals, and small and medium-sized commercial businesses to access borrowings. It covers the full spectrum of private individuals and companies that would want to borrow money.”

Asset finance software can provide a matching service to connect lenders and borrowers by ensuring that financial information is clear, timely, and complete.

Customer focus

Lenders must base their operations on flexible, customer-focused asset finance platforms that are future-proof. To get the financing they require, borrowers are searching for digitally enabled loans and partnerships. They will demand more options, greater communication, and solutions that are available when they need them.

Finance firms that use cloud-based technologies can access centralised and combined consumer data. Additionally, if they take it a step further and incorporate a Software-as-a-Service (SaaS) delivery model into their companies, they will have an extremely adaptable and scalable platform that can be expanded with new features and services as necessary.

As a result, legacy systems and cumbersome internal IT infrastructures are eliminated, leaving behind strong relationships and integrations.

“We provide software as a service for the lenders as a configurable solution, and customers work with us to configure the solution to meet their requirements in terms of the look, feel, and utilisation of the information collected,” continues Nelson.

“The very core around this, and through the application cycle, is the configuration of which parts of our SaaS platform fits their requirements. To decide what data is collected by the front end related to applications, details of asset,s and any other information needed to be able to make good and quick credit decisions.

“They work with us to plan that journey and connect the pieces of information that need to come into the solution for them to make a decision. That journey is configurable and based on the latest technology with many APIs that allow easy collection of real-time flow of information.”

What’s next in commercial banking

Introducing Q2’s Catalyst platform, a comprehensive, all-encompassing digital banking system. It helps firms gain customers and onboard them more quickly, providing a better service to forge closer bonds with customers. It is a growth engine for finance companies and their customer communities, with treasury management tools, small business solutions, relationship pricing, a fintech marketplace, and more.

Here are some key benefits:

  • Win more and (and better) deals
  • Fully onboard faster
  • Tailor every experience
  • Do more with your data
  • Offer a fintech marketplace
  • Protect your customers

Since 2004, when Q2’s founder Hank Seale set out to build stronger and more diverse communities by strengthening their financial institutions, the company has gone from strength to strength. It now boasts more than 20 million end users using its digital banking platform, and in 2021 alone, onboarded a million new financial accounts last year.

The platform has prevented over $1.5 billion in business banking cheque fraud while improving its clients’ digital marketing success rates by over 150%. It provides a comprehensive and real-time understanding of commercial relationships when structuring and pricing deals. It also helps Q2’s clients understand the value of their customers, and how potential deals can impact that value by assisting teams to fine-tune deals that best fit end-users’ finance requirements and their projected profitability.