MARLBOROUGH, Mass. — Web applications for consumer loans are up 25% at Digital FCU here, thanks to a new online tool that allows borrowers to customize the loan upfront, then delivers instant approvals and automatically fills out a membership application — all in as little as five minutes.
In March, Digital became the first CU to launch fiVISION's Web Loan module, which integrates the process of becoming a new member and getting a loan approval. The Indianapolis, Ind.-based fiVISION is a CUSO providing CRM solutions to credit unions.
"We simplified the process for applicants to easily become members without re-entering any information," said Diane Richard, VP-consumer loans at the $4.2-billion CU. Previously, the loan and membership applications had been two completely separate processes. "Now, we have removed that hurdle."
Even from the outset, the application process is friendlier, Richard continued. "Before they start the loan application, the person can indicate what type of loan they want and then use a calculator to see what the payment would be. They can alter the payment based on a shorter term or a lower payment."
More than three-quarters of all applicants completed the new process and got a decision, but little more than half did so using the old process, either because they found out that the loan terms are objectionable or that they had to re-key data to complete a membership application, explained Richard.
The uptick in online applications coincides with a downturn in applications overall, she said. At the same time, delinquency rates for loans originated online are not any higher than rates for loans taken face-to-face because underwriting rules are the same for both.
In the first month of use, Web Loan garnered nearly 2,100 applications online for $26 million at Digital, Richard said. The CU is getting about 65 consumer loan applications per day, up from an average of 51 per day before switching to Web Loan, she said.
Once a non-member is approved for a loan, Web Loan directs them to a membership application, which is pre-filled based on the data entered on the loan app. "We've eliminated redundant data-input," said Richard.
A nonmember can be preapproved for a loan and enrolled as a member in as little as five minutes, added Mike Winter, president, fiVISION.
In developing Web Loan, fiVISION considered why people commonly abandon online loan apps, said Winter. "We thought about how to do this from the consumer's perspective. So many applications ask for personal information right out of the box. We changed the order of the process so that consumers can first dial-in on what their needs are and what the payments would be before they provide personal data. The hope is that, on the back-end, there's a higher probability of getting borrowers who are serious about closing the loan."
It's too soon to tell on close ratios, Richard said, but she's "confident" that the simplified process will increase the number of online loans closed.
Current members are also spared a certain amount of data entry when applying for loan because Web Loan is interfaced with Digital CU's core processing system, said Winter. "If you're a member, your information is accessed from the host system and prepopulated in the loan application and checked to see if you've prequalified or been preapproved."
Members who aren't preapproved, as well as nonmembers, are interfaced through to the loan origination system (LOS) for decisioning, he said.
"More people are being instantly approved online because the application is directly interfaced with the LOS," Richard said.
Web Loan's direct interfaces are unusual, Winter said. "With most online application systems, loans and member enrollment are separate processes. The online loan feeds into the LOS whereas the enrollment feeds into the core processor."
Previously, Digital outsourced the loan application process, which wasn't interfaced to the core system and didn't afford the opportunity for people to customize the loan terms upfront. The CU has offered online member enrollment for three years through fiVISION, though the process had been separate from the loan application process.
"In the past, we'd find that the person was approved but still had not processed the membership application even two weeks later," Richard said. "That meant there were lots of follow-up e-mails and phone calls to get the person to enroll. We've eliminated that gap and can now close the loan on the same day."
