Six elements credit unions should look for in a modern LOS

The race to attract and retain borrowers is on, and credit unions relying on outdated loan origination systems (LOS) are falling behind. Manual processes slow down operations, increase costs, and frustrate borrowers who now expect instant, seamless experiences. According to Astute Analytica, the global LOS market could reach nearly $10 billion in the next five years, driven by rapid advancements in automation, artificial intelligence (AI), and digital lending solutions. Today’s LOS must do more than process loans; it must enable smarter, faster decisions, strengthen fraud protection, and deliver frictionless engagement at every touchpoint.

Credit unions that delay modernization risk losing business to fintechs, banks, and other credit unions leveraging cutting-edge technology to attract and retain borrowers. To remain competitive, credit unions must carefully evaluate whether a LOS removes friction, promotes efficiency, and is worth the investment.

Here are six critical elements to consider.

A modern LOS is most effective when paired with an account origination solution. With an integrated platform, accounts and loans can be opened in minutes while seamlessly verifying identity, eligibility, fraud, and credit, eliminating redundant data entry. By unifying these components, credit unions can enhance cross-selling functionality, reduce redundancies, and improve operational efficiency.

Loan decisioning should be fast, accurate, and adaptable to the credit union’s unique lending strategy. Traditional decision engines rely on limited attributes—such as length of residence, employment, and debt-to-income ratios—often requiring manual reviews. Meanwhile, advanced decision engines powered by artificial intelligence (AI) and machine learning (ML) analyze a broader range of data, resulting in more accurate risk assessments and faster, automated approvals. These engines also make more nuanced decisions, assigning appropriate loan amounts based on a more comprehensive data set. In addition, by embracing intelligent underwriting technology, credit unions can improve efficiency and enhance the borrower experience.

The right system comes with the administrative tools to empower credit unions to customize steps and decision points, tailoring the workflow by loan type, channel, and internal procedures, without requiring extensive coding or IT support. A user-friendly interface with low-code or no-code options enables lenders to build adaptable workflows, while API capabilities provide deeper customization when needed. This flexibility enables the LOS to evolve alongside the credit union’s changing needs.

Automation plays a crucial role in improving efficiency, lowering operational costs, and reducing manual workloads. A modern LOS should support automation across various manual tasks, such as email notifications, queue management, and data exports, allowing staff to focus on higher-value tasks. For example, automation can use AI to classify, analyze, and extract data from documents like pay stubs, W2s, and credit reports. By leveraging automation tools, credit unions can minimize human errors and accelerate loan processing times.

A LOS must integrate seamlessly with core banking systems, customer relationship management (CRM) tools, and document management solutions. Modern systems go a step further by enabling credit unions to connect with a broad network of third-party providers via APIs. This allows them to expand their capabilities through enhanced fraud detection tools, improved member communication, or better data analytics.

Effective communication is crucial. Borrowers expect updates through their preferred channels, such as email, text, or instant messaging. Text messaging is one of the most effective tools for reaching borrowers. Soprano Design reports that text messaging has open rates five times higher than email, with 90% of texts being read within three minutes. By incorporating modern communication tools, credit unions can enhance engagement and build borrowers’ trust.

Innovative technology solutions are transforming loan and account origination. Rapid advancements in automation, artificial intelligence technology, and machine learning are revolutionizing the way credit unions do business today. By selecting a modern LOS that aligns with their growth strategy, credit unions remove friction and drive efficiency, enhance borrower satisfaction, and position their credit union for success.

For more information about these six key elements of a modern loan origination system or for more guidance on how to select your next loan origination system, review our eBook: A Practical Guide to Selecting the Right Loan Origination Solution.