Why a slower loan market is an ideal time for bankers to invest in innovation

The banking industry is still facing slower loan demand due to higher interest rates and economic uncertainty while also trying to juggle long-withstanding issues like talent shortages, staffing difficulties, and industry disruptors fighting for market share. However, slowed loan demand presents an ideal opportunity for community institutions to evaluate processes and optimize operational efficiencies.

Bankers should use this time to evaluate their foundation, determining if structural processes are solid and making sure operations, credit admin and loan ops teams are running cohesively. Only after these foundational pieces are set should technology start to be layered on top of those processes where needed.

Too often, institutions purchase technology to fix a problem without actually addressing the root cause. Taking a strategic inventory of current processes and operations, looking for any gaps or issues, will help identify the largest pain points and where technology would be most impactful. It will also help prioritize which solutions to invest in first.

When weighing new tools, bankers should holistically consider how the technology would impact all sides of the business. Assess if the solution can be built upon, or if it only solves an isolated issue. Consider both front-end and back-end processes. For example, if you purchase a new loan origination system to streamline onboarding but you haven’t built the back-end processes to effectively manage the tool or an increase in volume, the technology is not likely to have meaningful impact. During a slower period, bankers will have more time to research and vet potential new solutions and partners.

Another benefit of investing in innovation during a slow period is greater bandwidth for testing and implementation. A less hectic time typically allows for systems to be run in tandem. Plus, there is more time to ensure the technology is being fully implemented. Banks will often purchase a comprehensive system but will only implement it partially, leaving critical functionality un or under-utilized. During a slower period, bankers will have more time to fully implement and train staff on how to use and optimize the new system, working out the kinks before loan volume ramps up.

There is still a lot of work to be done when it comes to commercial lending innovation, however now is an opportune time for bankers to take action. In a digital-first world with mounting competition, those that fail to take the steps to streamline and automate processes with modern technology stand to be left behind. Bankers who take advantage of the current slowed loan growth, evaluating foundational processes, holistically considering new technology and fully implementing systems and onboarding employees, will be strongly positioned for success in any market condition.