How can today’s financial institutions experiment with new products and services without overcommitting to costly investments? The answer may be in lending-as-a-service (LaaS).
In the same way that Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) models have transformed how businesses purchase and implement technology, LaaS is expected to deliver similar benefits to financial services organizations. In fact, the LaaS market is expected to reach $742 million by 2027, up from $466 million in 2018.
Rather than rip and replace multiple legacy software solutions, financial institutions can implement a LaaS solution and quickly benefit from a wide range of services such as self-serve pre-approval, automated decisioning, asset verification, and digital closing.
What are the benefits of LaaS for lenders?
LaaS solutions can offer a number of advantages to financial services firms. Here are five of the top benefits that lenders can see:
1. A helping hand with security and compliance
It’s no secret that the financial services sector has more stringent security, compliance, and governance controls than almost any other industry. Acutely aware of industry regulations, LaaS providers design solutions with industry-standard data security and compliance in mind. Features like bank-level encryption provide reassurance and peace of mind to financial institutions and consumers alike.
2. Reduced IT overhead
Building custom solutions in house can be incredibly costly — requiring teams of IT experts, data scientists, and security professionals who are in short supply. With a LaaS platform, lenders can see expenditures for acquisition, decisioning, and servicing loans reduced by up to 80%. What’s more, financial firms may no longer have to pay for computing power they don’t need, since processing capacity can be scaled up or down as required.
3. Speedier deployments
For many financial services organizations, a complete overhaul of their core banking systems such as LOS, mortgage origination platform, verification processes, and various other point solutions is not only too costly to be feasible but is also at risk of being impacted by an over-emphasis on planning and rollout timelines. LaaS solutions can be a timely and cost-effective alternative. IT teams can quickly unlock a variety of services — that cover processes from verifications and pricing to data connectivity — all of which are managed through their LaaS provider.
4. Faster digitalization
By the end of 2021, only 5% of banks reported to have finished their digital transformation initiative, according to Blend-commissioned research from Forrester Consulting. This suggests that manual, paper-based account opening, identity verification, and closing processes may still be the norm — all of which can hamper productivity and increase frustration. By bringing end-to-end lending processes together in the same digital platform, LaaS can help turn this around. It also offers lenders easy access to advanced digital technologies such as AI and machine learning, which can help automate key processes, streamline workflows, and improve loan origination times.
5. Improved innovation capabilities
Adapting to change is essential in the financial industry, but can be challenging to achieve with incumbent technology solutions. LaaS provides financial institutions with access to the latest software so they can adopt new features quickly. In some cases, low-code drag-and-drop features can even help teams launch entire new products quickly and effectively, enabling them to respond to market changes as they happen and provide unique, need-aligned customer journeys.
Level up against the competition and deliver what borrowers are looking for
LaaS solutions can turn challenges into opportunities for today’s financial services providers.
A best-of-breed platform, delivered by a domain expert, can help financial institutions modernize the entire loan process and, as a result, meet growing customer expectations for speedy loan origination, more personalized product offers, and seamless service — and all while staying compliant to a growing number of industry regulations.