Your goal as a lender is to maximize your returns. It’s a complicated balance between costs, acquisition, risk management, capital, rates, payback terms, collections, and countless other factors.
Not only do you need precise visibility into these attributes and how they interact with one another and contribute to the bottom line of your portfolio, but you also need the ability to manipulate, adjust, and optimize them while being able to measure the impact of changes and iterations. It’s complicated.
Beyond that, you need the tools and technology to be able to implement changes while staying at the forefront of innovation so that you don’t fall behind.
Technology itself is complicated in its own right, and it all moves incredibly fast. There are thousands of options, and it's impossible to keep up. Let’s call it Complicated2. Whether you are a small lender lacking resources or a large lender with overgrown and outdated systems, it’s complicated working on your processes. Meanwhile, lenders are constantly pushing to improve, and technology offers them more opportunities to do just that than ever before.
And you need to be able to do all of that fast.
The lending process takes time, and lenders historically have been slow to advance their operations. But after a turbulent few years, the adoption of outsourced technology partners is on the rise.
We’re in an era where tech has enabled a level of innovation that is more impactful and faster than ever. If you're a legacy lender, you’re at a higher risk than ever before to be left behind by the current ecosystem.
How are other lenders updating their processes, and how can you do it? The answer is outsourcing technology.
Outsourcing Technology is getting third parties to develop, test, and strategize the key pieces of the lending pipeline (loan origination, decision engines, loan management systems) so that you don’t have to code and update your own. You can rely on the hard work of others as a foundation for your lending success.
As we recently predicted, 2024 is already seeing an increase in the rate of adoption of outsourced technology in the lending industry. Technology can be leveraged to make lenders' processes faster, smarter, and better. These third parties are able to ideate and innovate their tech, while lenders worry about the other details that make them profitable.
Innovation must include speed as a subset.
Why is speed critical? Haven’t you heard of the term “fail fast”? If there’s new technology out there that claims to eliminate fraud or reduce first payment defaults by 90%, then lenders shouldn’t have to spend hundreds of thousands of dollars and wait several months to find out it works. With the commitment in time and money, it needs to do more than just “work,” the technology must truly move the needle so the cost and effort pays for itself.
The time spent pursuing an option that doesn’t work is time lenders lose forever. The time wasted on one technology that doesn’t work could be spent on implementing something that does. That may be the difference between a lender being profitable or not or enabling them to lend 10X more capital than they did before. So, fail fast, test faster, and pivot to what works.
Outsourced technology allows businesses to adapt and adapt rapidly.
All that is why we built PayPlan, a platform that doesn’t just have the most innovative technology available, but it’s built in a way that lets our clients and vendors test other new tech, modules, and connections quickly. By enabling our vendors to be able to test quickly, we are bringing in the latest and greatest technology from outside of our company ensuring that our clients always have access to the best tools available to help them hit their primary goal - be profitable.
Not all tech works friendly with other integrations. In many instances, technology providers want to lock their users into tech ecosystems to guarantee the provider’s bottom line. While having every piece of the lending pipeline built by a single entity means they will work well together, that doesn’t mean they’ll always be the best tech available.
As advanced as our PayPlan technology is (and it is), how great our people are (and they are), and our ability to keep innovating (we couldn’t stop if we wanted to), we know we’re not going to be able to create all of the best new technology ourselves all the time. We’re not that naive.
We knew it was important to build our platform to easily take advantage of the latest technology, whether we created it ourselves or not.
PayPlan is one platform to get new lenders or vendors implemented in days, instead of months. We can run real borrowes data or new applicants to test, fail fast, and improve results in a fraction of the time compared to traditional solutions that exist today.
Last year, a current client of ours embarked on a mission to integrate their legacy solution with AI to help reduce fraud. Fraudsters are always looking for new ways to capitalize on loopholes in rules or gaps in technology. With the advances in artificial intelligence and new ways to verify identities, it’s tempting to quickly jump on new technology that makes bold claims of eliminating fraud.
Unfortunately, these new tools are not free, and they require resources to implement. If you spend months of resources and thousands of dollars without knowing the true impact, then it’s a big risk. We’ve seen clients do this with their legacy solutions, and the result was that the technology reduced fraud, yes, but it also eliminated a huge number of real qualified borrowers at the same time. The tech wasn’t equipped to handle the intricacies of real people. The loan volume decreased so much that the savings from reducing fraud didn’t pay for itself.
If they had a platform like PayPlan at the time (they now do!), then they could find out if the new solution would work in a fraction of the time, for a fraction of the cost, and it wouldn’t have damaged the majority of their business. PayPlan works in such a way that allows you to segment off some of your processes for testing, allowing you to discover whether or not other tech will solve problems faster and better than ever. Once we implement new technology, we can change the waterfall of underwriting rules, change settings, or tweak the settings in real time without any new code having to be written.
All because we built PayPlan from the ground up to work well with others so that it works well for you.
Outsourcing technology is the way of the future for all lenders, and here at Business Warrior, we’re proud to be here to help lenders like you find your path forward.