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4 Criteria When Assessing a Modern-Day Loan Origination System

July 3, 2019

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The lending landscape is growing increasingly competitive, and the loan process can be frustrating and time-consuming. A loan origination system (LOS) can provide clarity to the intertwined data web that the loan lifecycle weaves, but not every LOS is built the same. Here are four critical criteria to consider when assessing a modern-day LOS for your financial institution:

Implementation and integration –

You don’t want to spend time and/or money on software you don’t use. If you can’t successfully implement a product, it’s not worth the time or monetary investment. When considering loan origination software, ask questions about the implementation process. Is it done in-house or by a third party? How long will implementation take? You need to have a clear plan for implementation and how much will be required of your staff to implement the software successfully. You all have your regular job duties to complete on top of this additional project, so make sure your team has the appropriate bandwidth before the project gets underway.

On top of implementation, it is vital to ensure the software easily integrates with other products you are currently using, including your core. Find out if you can pull the necessary data from the core and how long it will take. What additional third-party applications, if any, are supported for integration by the LOS?

Intuitive interface –

A popular Tweet by Iconfinder CEO Martin LeBlanc says, “A user interface is like a joke. If you have to explain it, it’s not that good.” As you research various commercial loan origination software, don’t overlook the user interface. The dashboard should be set-up so that different user roles can access the data they need to do their job effectively and efficiently. The experience should be configurable to the user, irrespective of the role. Also, be sure to explore the navigation menu to ensure that you can easily navigate to the areas you need. If you cannot quickly and easily find the information or function you are looking for, will that software really make your job any more efficient?

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Agility

Another thing to consider when researching an LOS is, does this software act the way it was designed to work? Does the vendor integrate data among its own product/data tables? The systems need to talk and work together. If you are working in a loan application, the application should actually inform the loan decisioning engine so you can produce a quicker loan decision.

Consider the important distinction between configurable and customizable: configurable software gives you all of the tools and allows you to flip switches and adjust settings as needed to get what you want. Customizing the software might be a little more complicated, requiring you to write code or build something from scratch. That opens up a whole new set of questions you need to consider: Do you have that expertise in-house or will you need to hire an outside party to do it? What code is the software written in? Is it easy to make changes to? Find an LOS that can not only work with and integrate other data but allows you to configure the software to suit your needs easily.

The on-going partnership

Remember, you are not just picking features and functions when looking for an LOS. You are looking for a business partner that can provide support, advisory services, innovation, and scalability. Do they share your actual goals of growth and helping the communities you serve? Look at their support structure. Do they use a ticket system or can you pick up the phone and call a live person to get answers right away? How long does it take them to resolve support issues, or is there a database where you can troubleshoot problems? You also want to ensure you’re partnering with an innovative company that releases product enhancements regularly. They should be taking customer feedback into consideration when making product enhancements, so the upgrades actually serve you better. Also know how much, if anything, these enhancements or new product releases will cost your institution.

Change is inevitable, and in the world of financial institution M&As, it happens more and more. Is your LOS set up to grow with you? Your LOS should scale with you and not hinder your growth. Also, think about what else a technology partner brings to the table. At Abrigo, for example, we have an advisory services team that can help with everything from CECL implementation to fraud detection to building reports. We offer more than just software so you can be sure we have the expertise to back our products. In addition, Abrigo Connect allows you to use your own data to evaluate efficiency, manage risk, and drive growth. Abrigo Connect is a cloud-based data visualization and management tool designed specifically for financial institutions and the executives who lead them to make strategic decisions based on their own data.

You should also do your vendor due diligence and ensure they can supply SOC1 & SOC2 because an LOS can actually increase due diligence.

The lending function will continue to drive growth at financial institutions, and that does not look to slow down any time soon. You don’t want to go through the process of selecting a loan origination system that will only last you a few years with all of the due diligence that is involved. Make sure you ask outside of the box questions and think about what the software will look like in one, two, and five years. It should serve you just as well then, if not better than it does today.