What are the two types of lenders who won’t last? Those who don’t use their data.

All jokes aside, data is the lifeline that keeps lenders ahead of their challenges. There will never be a time with no struggles to overcome. The way that every financial institution has endured is by planning with data.

Who are lending metrics really for?

Smaller lenders may think they’re exempt from the rule that businesses need data. That couldn’t be farther from the truth. Small lenders significantly benefit from collecting and analyzing their lending metrics. While larger firms can weather a little more damage, others need to carefully plan each step for their success.

Some of the most valuable information likely won’t come from any one lender. Instead, compiled industry data should guide your next steps. For example, mortgage lenders should stay on top of property records and the movement of assets to make educated decisions. It can also help you steer clear of trouble. Market watching, especially during a recession, can prepare lenders for what’s to come.

The new-tech jitters?

It’s not uncommon for fear of technology to hold lenders back from capturing and utilizing their data. And reasonably so. For someone whose business is money, the idea of losing both time and money by adding tech is an absolute no. If your staff is not tech-savvy, the apprehensions grow.

That said, the tech that lenders use knows about these apprehensions. Many have full teams to handle implementing the tech and training your staff. In any case, it’s good practice to outline your concerns with your team before interviewing tech providers.

So, what are the five ways data can improve your lending

1. Ensure consistency in processes

How can you be sure you’re following the right protocol if you have nothing to check? Missing information, disorganized flows, and fragmented processes cost time and resources. However, just a little time spent organizing your process results in mountains of useful information.

First, make sure you know what you want from your data. What processes are you trying to improve? Are you already experiencing a problem or looking to enhance your existing flows? Once you have what you want, see what your current data has and lacks. To get the best insights, you’ll need high-quality data.

Some loan management software will go as far as to alert you to inconsistencies. Of course, with unified data, you can then compare deals and pull more significant insights. Every insight you get depends on the quality of your data. Make sure that it’s complete.

2. Meet your borrowers’ needs

How can you tell that you’re taking action on your deals on time? Do you have a log of communications with your customers? If you don’t, you may be missing significant opportunities to cultivate repeat deals.

Studies show that your customer experience is the number one factor clients consider when selecting software.  These experiences don’t just include how they interact with your technology, but also your customer service and overall speed.

When you begin, start with a baseline assessment of your customers’ experience. For example, what are your current metrics for customer care? How are you collecting them? If you have trouble answering those questions, then think hard about the software you’re using.

Cloud lending software lets you see the detailed history of your communications with your borrowers. If one or more deals encounters an ongoing problem, you can see the email chain, messages, and actions taken to solve it. In a similar respect, this brings systemic issues to the surface, so you don’t have to spend as much time searching.

3. Find inefficiencies

Speaking of, do you know how long you spend finding those systemic issues? After ensuring your data is complete, you can then understand the amount of time spent on any given step. Digital lending apps eliminate most duplicate processes, but some may still slip past you. Take a close look and detailing your procedures using your data. Where do you see redundant, time-consuming, or unnecessary steps?

These analyses are necessary under normal circumstances but critical in financial downturns. Collecting essential data during prosperous times helps your business pull through its struggles. Knowing how to identify them early is one of the superpowers of data for lending.

And what about those wasteful processes? You can use them to identify opportunities to optimize pieces of your lending with AI or process integrations.

4. Track trends in late payments and delinquencies

Late payments happen. Delinquencies, too. But when is a one-time event really part of a bigger pattern?

Digital lending systems can highlight deals or borrowers with repeated missed payments and highlight risk factors before they go into default. Considering the challenges lenders face, looking at new risk indicators is the only way to stay afloat.

What is your company’s plan to ride out the next financial downturn? Of course, they will happen, but you must steer yourself to safety with data. By collecting data both in good times and bad, you learn where (and where not) to steer your operations.

5. Right product, right time

You may think you know your clients inside and out. How can you be sure without data? Smart, data-driven lending covers more than knowing how they work. It helps you offer them the right product at the right time for the right price.

Demographics data guides you to your customers. After all, the needs, preferences, and results that baby boomers value are undoubtedly different from younger generations. Your demographic guides you on how to structure and price your loans. Offering the right product to the right audience has the bonus of increasing originations and lowering delinquency rates.

Final thoughts

Lending without data is a lucky guess at best. Especially in uncertain times, your lending NEEDS data to survive. Keep in mind that your competitors may already be using this and more in their lending. While other factors, like your software and team, steer your company in the right direction, the only test to be sure lies within your data. Only then can you begin to prepare your lending for future trends.

Having apprehensions about technology is expected. Keep them in mind and discuss them when addressing your software and lending metrics. These apprehensions are not a barrier to your use of data but essential considerations that help you find the right fit. Remember, data is there to help you. It’s the map that leads you to your destination.