3 minutes
This is bonus from the “Need for Speed” in the June 2017 issue of CUES’ Credit Union Management magazine.
Gaining speed around providing credit is a different proposition from speedier payments. Fast credit focuses on the critical but relatively infrequent front-end event of screening applications and approving loans. Once a mortgage or car loan has been made, borrowers like payment convenience but don’t care about speed unless they are delinquent. And a credit card linked to an approved line of credit generally provides a fast-enough way to buy something on credit.
The key these days to speedy lending is using mobile device technology to reduce member friction and add value, observes CUES member Kris VanBeek, CCE, CIE, president/CEO of $1.25 billion USAlliance Financial, Rye, N.Y. USAlliance Financial members can use their smart phones’ cameras to upload loan application documents; use text recognition to capture name and address information of a photo of a driver’s license; and create virtual strong boxes to securely store important documents like birth certificates and tax filings that might be needed to attach to credit applications. They can also use their phones GPS features to validate location and support authentication.
For credit products, the need for speed is concentrated primarily on the front-end decision and implementation, explains Sabeh F. Samaha, president/CEO of Samaha & Associates Inc., Chino Hills, Calif. Decisions should be fully automated or mimic full automation, he says.
“All the pieces needed to make a decision should be pulled together online in real time, including those drawn from third-party systems,” he notes. Then the onboarding should be automated and essentially instant, with full visibility of the status to the applicant. Once that has happened, the need for speed is less urgent, but still needs to be applied to processing delinquencies, collections and workouts, he adds. “It’s all about integration and seamless automation.”
For credit cards, instant issue is a very valuable feature, Samaha insists. “Being able to hand a member his or her card right there in the branch and show him how to use it and appeal to the member to make that card top of wallet is a huge point of influence that can really pay off for the CU,” he points out. Once the card is in service, transaction speed will be a non-issue unless a processor blocks a transaction because it looks like it could be fraudulent, he adds.
Among its credit products, $1.3 billion Evansville Teachers Federal Credit Union, Evansville, Ind., makes a lot of indirect automobile loans where speedy approval is important. It uses auto-decisioning for about 15 percent of them, but even there the CU takes time to run it by a human underwriter.
“Nothing can replace the judgment of a good human underwriter,” notes Sara Robinson, VP/consumer lending. “We’ve trained our underwriters to expedite their decisions.” On average, it now takes a staff member between six and seven minutes to approve an indirect car loan, she estimates.
That’s not real time, but it’s faster than the industry standard. “We’re a dominant player in our market,” Robinson explains. “On occasion, we lose out to a lender that offers better rates or a larger reserve to the dealership, but we don’t lose a loan simply due to speed.”
Evansville Teachers FCU doesn’t do instant issue yet, but is considering it. “Speed of issuance is important; however, rate and rewards are where we’re most competitive,” Robinson notes.
Speed is definitely an issue for mortgages, according to Annette Maier, Evansville Teachers FCU’s VP/real estate lending. “Average closing time is definitely on our radar,” she notes. “We’ve studied and improved our processes. Home buyers are excited to get into their new home and we want to help them achieve that as quickly as possible.”
Richard H. Gamble is a freelance writer based in Colorado.
