FINTECH NEWS
Digital lending promises speed. Credit unions still need a human touch.
As borrowers expect faster decisions and smoother applications, credit unions are working to automate routine tasks without sacrificing sound lending standards or personal service.
Digital lending is raising borrowers’ expectations for faster decisions and fewer hurdles, pushing credit unions to rethink how they collect documents, assess risk and move applications from submission to funding.
But executives at Great Lakes Credit Union in Illinois and Amplify Credit Union in Texas say the challenge is not simply speeding up approvals. It is making the process easier without sacrificing sound lending decisions or personal service.
Borrowers increasingly compare financial institutions with digital-first companies, expecting to apply on their phones, receive timely updates and avoid repeated requests for information. Steven Bugg, president and chief executive of Great Lakes Credit Union, said members care less about which department handles a loan than whether the process moves smoothly from application through funding.
Great Lakes, based in Bannockburn, Ill., has $1.4 billion in assets and more than 100,000 members. Bugg said the credit union has focused on reducing friction as it grows through mergers and expands its consumer lending portfolio. Multiple handoffs, duplicate information requests and uncertainty about a loan’s status can all slow the process, he said.
“The biggest opportunity is reducing the number of touches required to get a loan funded,” Bugg said.
The most effective improvements may be operational rather than flashy. Bugg said routing applications to the right employees early and directing straightforward cases through more efficient processes can cut delays and rework. More complicated applications can then receive attention from lending specialists.
The distinction matters as application volumes grow. Bugg said Great Lakes processed thousands of consumer loan applications last year. Each time a file must be manually routed, corrected or reviewed by several people, the process can take longer and create more work for employees as well as frustration for borrowers.
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At Amplify Credit Union, which has $1.3 billion in assets and about 46,000 members, the biggest bottlenecks often come at the beginning of the application process. JC San Pedro, its chief lending officer, said collecting and verifying information about income, employment, bank accounts and assets can lead to repeated back-and-forth with borrowers.
That burden varies by loan type. Some auto and unsecured consumer loans can receive automated decisions when they meet established underwriting criteria. Mortgage and home equity lending are harder to accelerate because lenders must verify income, assets and the value of the property securing the loan.
San Pedro said the repeated collection of documents can slow a file and frustrate both borrowers and lenders. Amplify tracks the time it takes to move applications to a decision and then to closing, using those measurements to identify delays. The credit union also surveys borrowers after closing to learn where the process could improve.
Speed, however, is not the only consideration. San Pedro said a home purchase involves more than the borrower. Buyers may welcome a streamlined digital process, while their real estate agents still need direct support and personal attention throughout closing. A faster process is useful only if it serves both needs.
Both executives said automation can help employees focus on cases that require closer review, but it should not replace sound lending judgment. Bugg said Great Lakes uses tools such as trended credit data and risk-tier strategies to make more consistent decisions. Still, borrowers who are self-employed, have unusual income circumstances or need an exception to lending policy may require a deeper conversation with an experienced underwriter.
San Pedro said human review remains important for borderline credit decisions, borrowers with thin credit files or nontraditional income, larger real estate and commercial loans, and any application flagged for possible fraud. Automated decisions also need regular review to ensure the rules are performing as intended.
Fraud prevention must be part of the process from the start, San Pedro said. Identity verification, device and data checks, and alerts for possible synthetic identities should be built into digital lending rather than added after an automated process is already in place.
Technology integration presents another hurdle. A new platform does not necessarily simplify lending if employees must still move information manually between systems or enter the same data more than once. Bugg said credit unions should look beyond sales demonstrations and evaluate whether a system works with their core and digital banking platforms, uses existing member data and reduces employee workload rather than adding steps.
San Pedro likewise described integration as a deciding factor in whether borrowers experience a consistent process from digital banking through closing. If information does not flow between systems effectively, a credit union can end up adding technology without removing the underlying friction.
Measuring success requires more than tracking approval speed. Great Lakes monitors application-to-funding times, funded-loan conversion, abandonment rates, errors, member satisfaction and employee productivity. Bugg said the aim is to fund more loans, reduce rework and improve the member experience without adding staff at the same pace as business grows.
Amplify looks at application completion, loan volume, cost per loan and the strength of member relationships. San Pedro said the credit union is particularly interested in attracting more borrowing from people who already bank there but take out loans elsewhere. It will also compare the cost of originating loans with existing benchmarks while monitoring credit quality and fraud losses.
That last measure is central to the trade-off. Faster lending that brings weaker credit performance or greater fraud losses would undermine the gains from a smoother process.
For credit unions, the goal is to remove routine delays while preserving the judgment and personal attention that complicated borrowing decisions require. A faster process matters when it makes borrowing easier for members, gives employees more time for cases that need their expertise and maintains the standards that protect the institution.
“My view is that automation should handle routine decisions and administrative work so our lending teams can spend more time where human judgment adds the greatest value.”
– Steven Bugg
President & CEO
Great Lakes Credit Union
Ken McCarthy is manager of marketing communications at Tyfone, where he monitors the credit union industry and contributes to conversations shaping its future. He previously covered credit unions and community banking for American Banker and S&P Global Market Intelligence. He holds a journalism degree from Point Park University and has more than 15 years of experience covering financial services. He is also the author of three literary fiction novels.
