7 KPIs to Measure the Success of Your Lending Software

The lending sector is undergoing a significant transformation into a fully digital business. For instance, online lending platforms are making loans available to customers online at the click of a button. It has hence become essential for companies to digitalise their lending businesses' operations to deliver loan products and services both quickly and efficiently online. Loan Origination and Loan Management software are examples of technological products that can be implemented to streamline loan operations digitally.

Balance in approach is key, wherein it is vital not to give in to throw away prices as well as to ensure that there is an effective process in place to measure the success of technological implementation. Here, Key Performance Indicators (KPIs) are vital in measuring the success of such implementations and their contribution to overall business strategy.

Before we dive into the KPIs necessary to ensure the success of lending technology let's lay the basics in very simple terms to understand what a lending business is, what a loan cycle is, what banking technology is and why the lending business is going digital.

What is a lending business?

The core of the financial industry comprises lending companies, which include banks, credit unions, and online lenders. These financial institutions lend money to people and companies, who then promise to pay back the loan balance plus interest over time. This helps people and companies meet various financial needs, from starting a business to purchasing a home.

What is a Loan Cycle?

The journey a loan takes from the time of application to the time of final repayment is known as the loan life cycle. Origination, underwriting, approval, payment, servicing, and closing are all included. Every stage offers opportunities for modern technology to optimise and streamline processes.

What is Banking Technology?

Financial institutions use a broad range of digital tools, systems, and platforms, collectively known as banking technology, to improve customer interactions and streamline operations. These technologies are essential for automating procedures, decreasing human error, and enhancing risk assessment in lending. They range from data analytics to AI-driven decision-making engines.

Why is the Lending Business Transforming Digitally?

A variety of causes are driving the digital transformation of lending. Customers are becoming more accustomed to the convenience of Smartphone banking equipped with high-speed pocket internet facilities. Furthermore, automation lowers operational expenses and lessens the possibility of errors. This transformation is about ensuring long-term relevance and profitability, not just keeping up.

The KPI Standpoint: Gauging Lending Software Success

Below is a table comprising the major KPIs to assess the performance of lending software. These KPIs must be factored in at the time of purchase and implementation of the lending. Examples of some lending technology include Loan Origination Systems (LOS) and Loan Management Systems (LMS). etc

Long-term maintenance and improvement of these KPIs frequently necessitate strategic relationships with technological professionals. Such collaborations ensure that lending companies remain at the forefront of technology innovations, continually increasing KPIs and service quality.

S.No	KPI​	Description	Implications of High-Level	Implications of Low-Level	Preferred Level
1	Onboarding Rate	Measures how quickly the customer application and onboarding process is completed.	Faster pace attracts more borrowers	Applicants may exit if the onboarding process is long and cumbersome	High
2	Turn Around Time (TAT)	Measures how quickly loan applications are processed from submission to approval.	High customer satisfaction and competitive advantage.	Customer dissatisfaction, lost opportunities.	Low
3	Closure Time Cycle	Measures the efficiency of finalizing loans, from document signature to fund disbursement, enhancing the borrower experience and processing more loans.	Efficient, more loans processed, increased profitability.	Inefficiency, delays, and potential revenue loss.	High
4	Net Interest Margin	Measures profitability by managing the difference between borrowing and lending rates.	Strong profitability and efficient rate management	Profitability concerns, poor rate management.	High
5	Loan Approval Rate	Measures the percentage of loan applications that are approved.	Effective risk assessment, more approvals, and increased revenue.	Ineffective risk assessment and missed revenue opportunities.	High
6	Cost of Acquisition	Measures the cost of acquiring new consumers.	Vital for long-term customer growth, viability and cost-effective technology-driven acquisition tactics.	High acquisition costs and sustainability challenges.	Low
7	Operational Efficiency	Measures resource utilisation in the operations of the loan cycle	Cost savings, improved service quality.	Inefficient resource utilisation, and increased costs.	High

Conclusion

In conclusion, incorporating banking technology into the lending industry is essential for success and staying relevant; it is no longer a choice. KPIs are excellent instruments for evaluating areas that require improvement and advancement. Lenders can thrive in a constantly evolving digital environment by closely observing and refining these KPIs and offering more lucrative, customer-focused, and efficient financial services. Without a doubt, digital lending is the way of the future, and those who embrace technology and use KPIs will prosper in this revolutionary period.

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