Automation has become a fundamental part of our daily lives, from controlling our light switches and thermostats to sending out-of-office email responses. So of course it makes sense that we want to experience the same ease and speed when applying for a loan.
On the financial institution side, automation can be a game-changer — like significantly increasing operational efficiency and accelerating customer acquisition — but making the transition requires jumping over some serious hurdles. What technology should you use? Is it cost-effective? Will your team embrace it? All of these reasons (and more!) are why levels of lending automation vary wildly, as uncovered in our exclusive new research report, The State of Digital Lending Readiness.
With so many smart homes and smart cars, it’s no surprise that financial institutions are using more digital lending process automation on the consumer side. 91% of regional and digital-only banks are entirely or mostly automated. At community banks and credit unions, that number drops sharply but still represents a large portion: 45% are entirely or mostly automated.
The SMB side tells a very different story. Only 38% of regional and digital-only banks offer SMB loan applicants an entirely or mostly automated experience. At community banks and credit unions, only 29% of their SMB lending processes are entirely or mostly automated — and just as many say they are entirely or mostly manual.
Why Automation Matters for SMBs
Small business owners may have unique lending needs, but they’re accustomed to (and expect!) the same seamless, automated experiences they enjoy as consumers. More than one-third (38%) of financial institutions with entirely or mostly automated digital lending processes can approve and disburse in the same day, a statistic that’s the same whether you’re dealing with a consumer or an SMB loan.
We know small business owners need loans. Through the first 10 months of 2024, the Small Business Administration backed over 100,000 SMB financings, which is the most in over 15 years. Nearly half of small business owners took out a loan between mid-2022 and mid-2023 simply to cover the costs of inflation. Making the digital lending process as fast and easy as possible is a major competitive advantage for financial institutions.
Why So Many Financial Institutions Are Holding Back
According to The State of Digital Lending Readiness, over 75% say they value the benefits of the customer-to-banker relationship. Another big reason was that financial institutions say they have better efficiency or accuracy by doing some processes manually. However, our research shows that the longer financial institutions wait to automate — especially on the SMB side — the bigger their risk of falling behind the competition.