The Hidden Costs of Legacy Loan Systems in Community Banking

This article was previously published in the October issue of Independent Banker Magazine.

For many community banks, navigating the complexities of loan origination is like walking a tightrope without a safety net. Banks operating legacy systems often rely on manual and workaround processes, and juggle between disparate applications just to complete a simple loan application. While these activities may seem normal, the costs are sometimes not as obvious.

In this article, we explain the costs of having an outdated or aging loan origination system, present the benefits of onboarding a modern LOS, and make a recommendation for moving your bank forward. Advancing a bank’s LOS can yield a multitude of benefits that will help your bank thrive in today’s competitive environment.

The Costs of Legacy Loan Systems

The side effects of outdated loan systems are far reaching. Everything from processing delays to slow approvals to simply having programming limitations stack up, causing stress for employees and impacting the customer experience. Here are just some of the hidden costs to the bank:

1. Low efficiency and productivity: 
   Processes with multiple touchpoints and repetitive data entry significantly hamper productivity, leading to lower overall efficiency and straining resources that could be better utilized in handling more loans.
   
   
2. Intense competition: 
   Community banks are under increasing pressure from larger financial institutions that offer faster, more convenient loan services, risking customer loss if they fail to keep up.
   
   
3. Increased operational costs: 
   Poorly designed loan systems limit configurability and customization, often requiring banks to seek out third-party programmers that add to operational costs.
   
   
4. High compliance risks: 
   Banks put themselves at a compliance risk when they’re overloaded with manual processes. A modern LOS can ensure your loan officers complete all the required bank policies. An excel spreadsheet won’t do that.
   
   
5. Lost revenue opportunities:
   A poor customer experience can cause missed revenue opportunities. When loans are easily accessible and convenient, customers can be less rate sensitive, leading to higher margins at the bank. 

Reaping the Benefits of Modern Solutions

Learning the costs should be reason enough to consider investing in a digital lending solution. At IBT Apps, we offer modern loan solutions that enable bankers to chart a new course. Turn the page to see some of their features and how they can benefit community banks:

1. Online & In-Branch Loan Origination: Loans are available and accessible wherever a customer wants to be served. This helps a bank meet customer demand, increase conversions, and grow their business.
   
   
2. Workflow Control: With built- in business rules configurability, lenders can customize screens, forms, reports, and workflows based on the bank’s needs and policies. Lenders can design their own system without having to hire a programmer.
   
   
3. System Automation: When bankers choose to automate the loan process, it reduces manual efforts, speeds up processing times, enables faster loan approvals, and minimizes errors, which contribute to data integrity, operational efficiencies, and customer satisfaction.
   
   
4. Integrated Compliance Tools: Our modern lending products have integrated tools that perform data quality checks, collect data needed for required reporting, and provide secure document transfer. This all helps ensure that the bank never misses a policy, rule, or regulation again.
   
   
5. System Consolidation: By consolidating multiple systems into a single platform, banks can process every type of loan at every stage without leaving the system, further improving data integrity, and increasing productivity and delivery time.

Case in Point

A small community bank was struggling with an outdated and disjointed loan system when they came to IBT Apps for help. Their loan process required numerous steps, repetitive data entry, and accessing multiple software applications. This caused bottlenecks and delays operationally and frustration for their borrowers.

After working with one of IBT Apps’ lending products, the bank said they couldn’t believe how much the system optimized their lending process. Coupling the system’s built-in automation capabilities with the bank’s policies and underwriting guidelines (for loan applications, verifications, credit approvals, and documentation) improved the customer response time from a few days to a matter of minutes.

Start Exploring Loan Options With IBT Apps

If you’re ready to look at modern lending options, reach out to us at IBT Apps to discuss your lending needs. IBT Apps offers community banks 360° technology service, including core processing, online and mobile banking, and deposit and loan origination to compete in today’s environment.

For lending specifically, we offer two modern options: SecureLEND® and PowerLender® that each provide complete lending platforms for online and in-branch loan origination. They simplify and streamline the loan origination process for community banks while ensuring full compliance. While many of their features are similar, each product is tailored to address distinct lending needs.

During initial discussions, we’ll make a recommendation on which product will work best for your bank. Regardless of the solution, your bank will receive a product perfectly aligned with your needs, backed by exceptional customer service.

Additionally, your bank can integrate either of these loan products with our core processing and digital banking systems, further enhancing operational efficiency and reliability.

By choosing IBT Apps, community banks can turn their loan origination challenges into opportunities, delight their lenders and customers, and benefit the bank with a healthier bottom line.

Learn more about IBT Apps and our loan origination products when you visit our products page.