In tech, we tend to throw a lot of food metaphors around. We talk about the whole enchilada. We try not to compare apples and oranges. But we are especially fond of low-hanging fruit.
In the community banking context, it can seem like there isn’t a lot of low-hanging fruit around anymore that will lower risk, improve back-office processes, and delight accountholders.
But a delicious exception has recently emerged already ripe in the form of a loan servicing solution that empowers borrowers to make their loan payments via online or mobile banking.
Flexible Loan Payment Methods that Improve the Borrower Experience
Flexible repayment methods enhance the borrower experience and aid retention. Why? Because modern consumers, especially millennials and Gen Z, value convenience and the ability to manage their finances on their terms.
Financial institutions can cater to those preferences and improve the overall lending experience by providing repayment options. Whether through your digital banking app or a link on your site, allowing borrowers to choose whether to make a payment as a guest or enroll with a payment service satisfies their desire for choice.
In a recent study, 65% of respondents who do not use autopay for loan repayment say it’s because they want more control over when bills get paid, while 26% say not having their preferred payment type available makes paying loans online difficult.
The takeaways? You would be wise to deliver flexibility when it comes to scheduling payments and managing autopay and go all in on accepting the payment types your borrowers value.
Automate Loan Servicing to Boost Back-Office Efficiency
Automating back-office processes, such as the designation of overpayments to principal or escrow, can significantly enhance operational efficiency. Loan servicing solutions with built-in automation ensure that payments are accurately allocated, reducing the risk of human error and saving staff time. They also help maintain compliance, providing you with peace of mind.
Moreover, automating back-office processes can lead to enhanced liquidity. By ensuring that overpayments are promptly and correctly applied, financial institutions can optimize revenue streams and reduce the day’s sales outstanding (DSO).
Prevent Delays in Online Loan Payments
Where and how do consumers pay their loans? A recent survey says 71% use their biller’s website or mobile app, while 49% use their institution’s bill pay service.
While online banking payment services offer numerous benefits, they can also present challenges. Payments made through online banking payment services can sometimes arrive as paper checks rather than electronic payments, potentially delaying posting even when the payment originates from the institution's own online banking payment service. Not having the ability to process these payments in a timely manner can end up turning consumers off from their preferred method by triggering unexpected missed or late payments.
To address this issue, financial institutions must ensure that their loan servicing solution can handle multiple payment types efficiently. Doing so will minimize delays and ensure that payments are posted promptly.
Real-Time Loan Info that Builds Trust and Reduces Delinquency
Providing borrowers with timely, accurate information about their loan payments is essential for building trust and satisfaction. Loan servicing solutions that offer real-time access to core banking systems help achieve this. Borrowers can view their payment status, outstanding balances, and other relevant information instantly, allowing them to make informed decisions about their finances.
This transparency not only enhances borrower satisfaction, it reduces the likelihood of missed or late payments and service-related phone calls. When borrowers have access to up-to-date information, they are more likely to make timely payments and provide the right information for posting, improving their financial health and reducing delinquency rates.
Why FIs Are Adopting Payrailz Pay a Loan for Servicing Loans
The demand for advanced loan servicing solutions is evidenced by the growing number of financial institutions adopting Payrailz® Pay a Loan™. This innovative platform offers real-time access to core banking systems, ensuring that payments are posted immediately and accurately. By integrating with multiple banking and credit union cores, Pay a Loan provides borrowers with the most up-to-date information on their loan obligations, which provides the kind of personalized payment experience they embrace in other activities like shopping and rideshares.
Pay a Loan's real-time capabilities also streamline back-office operations, reducing the need for manual intervention and minimizing the risk of errors. This efficiency translates to cost savings for financial institutions and a superior borrower experience.
The Harvest: Unlock ROI with Flexible, Automated Loan Servicing
As the financial landscape continues to evolve, community banks and credit unions must embrace new technologies to stay competitive and meet the needs of their customers and members. By investing in advanced loan servicing solutions, financial institutions can position themselves for long-term success and increased loyalty.
If your institution doesn’t yet enable borrowers to pay the way they want, now is a good time to consider the potential harvest you could reap by removing unnecessary barriers to modern repayment methods.
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