Using AI to reduce the commercial borrower frustration

Would it shock you to hear that 60-80% of submitted loan applications have a wrong, missing, or problematic document when it comes to commercial lending? As a result, two-thirds of the time a lender spends on a loan request is dedicated to chasing down and reviewing documents. Those figures come from data collected from AIO customers across the U.S.

The Standard Loan Application Process

A business owner needs a cash infusion to buy equipment, property, or any business opportunities that will move their business forward. But they need a loan to be approved quickly to take advantage of the opportunity. They turn to their trusted advisor at their bank or credit union to apply. They hurriedly put together their loan application, submit it through whatever means, and now the application enters a queue, waiting for someone in doc review to confirm the application and documents are ready to move to the underwriting team.

The queue often takes 3-7 days before someone in doc review even looks at the application to ensure all the documents for the application are in place and are correct. Meanwhile, the business owner, having submitted everything correctly, believes approvals are in motion and progress is being made on their funds as they wait. However, we already know that there’s an incredibly high likelihood (60-80%) that some information remains missing, wrong, or problematic. But this issue will only come to light once doc review goes over every document attached to the application.

Within those days, one of two things will happen. Either doc review identifies a mistake, setting in motion a process to ask the business owner to re-submit the correct or updated documents for another review. Or worse, the business owner reaches out for an update on the loan’s progress, only to be told that the application hasn’t progressed to the next step because of a missing or wrong document. Round and round, this process goes, and precious days tick by.

While waiting, the business owner may miss their opportunity as well. In many cases, the mistake could be as simple as accidentally uploading the wrong PDF or the same one twice in lieu of the proper one. The borrower wonders why they couldn’t have been notified immediately rather than wasting 3-7 days while no progress was made.

The irony of this situation is that once the entire application with supporting documents is actually complete and submitted correctly, the approval process is often relatively short. According to AIO customers, two-thirds of the time spent on their loans is spent chasing and reviewing the documents to provide a fully completed application to underwriting.

The Resulting Impact of an Antiquated Process

We live in an always-on, instant-everything world. The impact can be far-reaching when that experience fails to materialize for a customer. As customers and lenders go back and forth via emails, phone calls, and paper trails, delays are inevitable.

From the customer’s perspective, this process amounts to a poor experience. With no shortage of choices regarding lenders, unhappy customers do not need to remain loyal. In addition to the borrower experience, every minute a lender spends chasing a customer or reviewing still incorrect documentation leads to higher costs for the financial institution and increases the risk of overlooked items. But more importantly, unhappy customers lead to lower retention, adding to costs and impacting the financial institution’s bottom line.

So, what’s a financial organization to do?

AI Technology Can Empower the Lending Process

We’re now at a point in history where artificial intelligence (AI) has advanced far beyond basic uses. It’s common for AI to be applied to front office use cases like AI-powered chatbots and middle office tasks such as identifying potential fraud, but today’s AI is capable of much more. According to a McKinsey report, financial institutions can benefit from advanced AI by unlocking as much as $1 trillion of cost savings for financial institutions each year.

The last decade brought about a cloud-first approach within lending; now, these lenders must now take an AI-first strategy. Technology can drastically improve the process and the experience for both lenders and borrowers.

Instant Document Verification is one example of using AI to streamline the application process which exists today. Borrowers and lenders can be intelligently nudged until all missing, incorrect, or problematic documents are resolved, then automatically notified when the borrower has a fully completed application ready for a quicker review before going to underwriting.

Applying AI to the initial verification process of the application eliminates the most frustrating parts of the experience. Rather than waiting 3-7 days only to find out that an application is incomplete and no progress has been made toward approval, both sides know immediately. The customer can take the necessary steps to update their application without wasting days. The user experience becomes frictionless.

For the lender, there’s no need to spend more time, incur more expenses, and increase risk as customers and lenders go back and forth through exhaustive emails to obtain the complete and correct documents needed to start the approval process.

Instant Document Verification is one of many ways AI can generate positive ROI for lenders. To learn more about how lenders are using AI, click here.