Small banks are increasingly outsourcing the job of originating consumer loans, trading face-to-face customer contact for high-tech service.

The trend has taken off recently, spurred by competition from bigger banks. Last year outsourcers handled 2.7 million noncard, nonmortgage loan applications for depository institutions of all sizes, according to Michael J. McEvoy, senior analyst at Tower Group in Newton, Mass. He projects 55% growth this year and an average of 40% thereafter through 2002-to about 16 million applications that year.

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