Online Lending: Essential to e-Finance

While consumers were developing a propensity for clicking through Web sites at lightning speed, they were still applying for loans either by phone or in the branch of their local financial institution. The time has arrived for traditional business models to change with the times. This especially holds true for lending and the financial institutions that offer lending services.

Online lending, in particular, is creating new must-haves for forward-thinking financial institutions. Online lending has the potential to evolve into a comprehensive system that includes data capture, auto decisioning and a direct interface with the host system.

Online lending is no longer an option for financial institutions but a necessity. Customer loyalty has never applied to loans-instead consumers usually apply for a loan from the institution that offers them the best deal in the shortest time. As more people lean toward online self-service, financial institutions must offer application origination and automatic decisioning online or risk losing them to other institutions.

Cost savings creates a compelling business case for online lending. An April 2001 Gartner study found that loans originated through the Internet cost 20%-30% less than those originated through traditional means.

It is not enough for financial institutions to employ the online lending channel. Due to the highly regulated nature of lending, business models must be adapted to not only include but integrate online lending in order to allow uniform decisioning across all channels.

Digital Insight, based in Calabasas, Calif., is an Internet banking software provider.