Loan Origination: The Benefits of Automation

What is loan origination automation?

Loan origination automation is when automation technology is used to optimize the process of approving, or declining, a financial loan once a borrower has requested it from a lender. This includes the request of funds right through to the disbursement, including borrowing screening and checks, document completion, underwriting, and ultimately the loan approval. 


Why should I automate loan origination?

When it comes to facilitating loan approvals, time really is money. Customers expect a speedy, intuitive loan application process with real-time decisions for mortgages, personal loans, and credit cards, otherwise, they will go elsewhere. In fact, the abandonment rate for online loan applications is at an all-time high of 97.5%. A smooth and efficient end-to-end loan process is a genuine competitive advantage.

But while the majority of lenders are now “talking digital”, not all are “acting digital”. And those who are actively digitizing their services struggle to integrate legacy systems to form a cohesive strategy. Whether provisioning consumer or business loans, the multiple touchpoints between the front and back office in the loan origination system make it particularly convoluted. All the more reason to automate the process.


Processes in the loan origination processes that can be automated

There are multiple processes within loan origination that can be automated, including: 

Application processing: Rather than manually reading and entering data on customers’ application forms, you can automate customer data capture using tools such as Optical Character Recognition (OCR) and validate it in real time, and perform eligibility checks in tandem to speed up the process. 

Credit scoring and assessment: You can automate the analysis of customer data to determine creditworthiness by integrating with credit bureaus and financial data sources. Automated algorithms can then be used to evaluate factors relating to both the applicant and the market to determine if they are a suitable loan candidate. 

Document verification: A great anti-risk advantage is integrating your systems with intelligent technologies that automatically validate the authenticity of documents, such as proof of identification, bank statements, and tax documents, so you don’t fall foul of fraud. 

AML & KYC: Enhance your compliance and risk management by automating anti-money laundering (AML) and Know Your Customer (KYC) checks to identify potential fraud risks and ensure you are always adhering to legal requirements. 

Loan underwriting: You can automate workflows in the loan underwriting process and set rules to determine loan amounts, interest rates, and repayment terms. 

Fund disbursement: Once the loan has been approved, you can automate the transfer of funds to the borrower’s account to ensure a swift and efficient release of funds. 

Discover how Bizagi's low-code platform can transform loan origination.

What are the benefits of automating the loan origination process? 

1 - Increased efficiency

Digitized customer experiences with instant feedback and results have heightened customer expectations in all aspects of life, and loan application is no exception. 

There are multiple elements and processes that make up the loan origination journey. You can automate multiple processes to bring efficiency, from eliminating manual data entry with application processing, right through to automation of the disbursement of customer funds. 

By automating the processes, not only do customers receive a better service, but loan providers can approve more loans and generate more revenue. A win-win situation.


2 - Enhanced customer experience

In addition to speed, customers now also expect highly personalized experiences. This means providing contextual multi-touch services on both mobile and desktop. 

Automation technologies that leverage customer data that you can use to generate customized loan options and repayment terms, to provide a better, personalized service for your customers. 

Plus, an automated onboarding process that offers transparency by always providing updates to the customer on the status of the application is sure to impress. An impressive customer experience will not only help to retain customers when they need additional financial services but can also turn them into brand advocates who can recommend their swift, pain-free loan application experience to others.


3 - Ensure compliance & risk management 

While being borrower-centric is all well and good, the imperative of adhering to financial regulations cannot be ignored. The loans market has some of the strictest compliance rules of any industry, and failure to comply is not an option. So whether you are looking to meet Basel III, the latest Payment Services Directive or even remain GDPR compliant, requirements to self-regulate day-to-day operations have increased significantly.

Transparency is now the name of the game. “[Transparency] has become foundational to how the loan operation relates to regulators, borrows and other departments within the financial institution,” states Fiserv in its Loan Origination Automation report.

“Transparency is not only being able to provide insight into origination processes and practices, but it also means being able to pass along transactional data to those who request it – when and how they request it.”

Automation allows you to achieve this transparency by establishing a single approach to loan regulation whilst permitting flexibility to adhere to local laws. If your processes are mapped out in process flows, you can also produce reports quickly and easily to prove that all checkpoints in your process have been completed to meet compliance standards.  


4 - End-to-end visibility

Loan origination has multiple touchpoints and approval stages it needs to go through, so it can be difficult to streamline the approach and maintain visibility over the steps in the process. 

Automation platforms provide real-time status updates and status tracking so different stakeholders in the process, from account managers to underwriters, can track the progress of applications and view pending tasks, ensuring no delays and helping users to prioritize their workload.  

Visibility can also help with continuous improvement. Creating a workflow with designated steps ready for automation ensures an overview of the end-to-end process. You can amend the workflow as and when you need to ensure efficiency and compliance. An automation platform can also provide dashboards and analytics to display KPIs and process metrics, so you can identify any bottlenecks or delays. 


5 - System Integration 

Many businesses struggle today with the complexity of new, intelligent technologies that improve processes not properly integrating with their legacy systems. This can lead to manual handoffs between steps in the process, which slow down operations and prevents real-time information exchange. Not to mention the organizational boundaries it creates that prevent you from being able to follow the process through end-to-end.

Additionally, banks will often find that products such as cards, mortgages, and loans are hosted on separate systems, creating a disconnect and a lack of transparency over customer profiles. For example, a customer may have a current account and mortgage with you, but you can only view information for one product at a time. This disparity creates issues for both the loan provider and the customer. 

By introducing an automation platform that acts as an orchestration layer, banks can gain a more holistic view of their operations and processes and customers can manage their products from a centralized view. This can be coupled with APIs and app connectors to ensure data is passed effectively between systems and processes. 


Old Mutual‘s staff had no single view of individual customers, which was slowing down their loan approvals. Their infrastructure was made up of 11 disconnected systems, which created an unnecessarily long loan origination process. 

By connecting disparate systems and automating the exchange of customer information with Bizagi, staff spent less time manually cross-checking data. They were instead provided with an intuitive view of customer profiles containing all the relevant data they required. This reduced their customer onboarding time ten-fold.

Transform your operations with low-code automation

If would like to learn more about how automation can accelerate your bank’s transformation efforts, download our free ebook, The Essential Guide to Modernizing Banking Operations. 

In addition to insight on how to offer innovative employee experiences, you will also learn how to:

- Create frictionless customer experiences
- Respond to regulatory pressures
- Bridge gaps in your system with automation