Gergo Varga
Jun 26, 2023
Credit decisioning software is leading a paradigm shift in the world of credit. Borrowers nowadays, regardless of their reasons for seeking out credit, want an effortless and rapid experience that caters to their individual needs.
On the other hand, lenders are desperate for cutting-edge customer experiences that reduce abandonment during the loan application process while also optimizing customer satisfaction levels and profits.
Unfortunately, legacy systems and infrastructure can make it difficult for lenders to provide a seamless digital borrowing experience. With the rise of artificial intelligence (AI) and real-time data analytics, online lending is becoming more automated than ever before!
In fact, the online lending platform market was valued at $ 7.04 Billion in 2022, and it’s estimated to grow annually by 26.5% until 2030 - according to Grandview Research.
This means that disruption by innovation is well underway, with banks and fintechs making strategic decisions that will determine the winners of tomorrow.
By choosing the right provider, lenders can improve customer satisfaction and boost revenue.
But making the right choice is not so simple: that’s why we’ve written this guide to help you make the right decision by understanding how credit decisioning software works, what kind of use cases it can help you with, and how to choose “the right one” for your needs.
(We also happen to be a no-code credit decisioning platform that you can deploy quickly and easily for instant credit decisioning, but more on that later.)
This blog post will cover the following topics and explore how you can make smarter, faster decisions with credit decisioning engine:
What is credit decisioning software?
The benefits of using credit decisioning software
How credit decisioning software works: automated risk assessment and more
Fuel efficient business growth with credit decisioning software
Protect your business from fraud with credit decisioning software
Find the right credit decisioning solution for your financial institution
Conclusion: Credit decisioning software is the foundation of modern lending
What is credit decisioning software?
Credit decisioning software, also known as a credit decision engine, is a powerful tool used by financial institutions to determine the creditworthiness of potential customers. Lenders rely on this technology to make better decisions faster and with greater accuracy than manual processes, while also reducing operational costs.
Automated workflows, smarter decisions
Credit decisioning software uses sophisticated algorithms to analyze applicants' financial health, credit, and payment history, as well as other alternative data to accurately assess credit risk.
It also features automated credit scoring, data verification, and fraud detection capabilities to ensure reliable results. With the help of this technology, lenders can offer more competitive payment terms, and make better loan approvals for their customers - while controlling risk and fraud.
Additionally, It also enables lenders to optimize lending parameters to fit their credit policies as the risk profile and goals of the business evolve. Some other key features of modern credit decisioning platforms include:
Automates the collection of data that underpins loan approvals, such as that of credit bureaus and third-party sources.
Automates the collection and analysis of alternative data such as bank and accounting information
Offers out-of-the-box capabilities to define credit models
Case management tools to speed up manual reviews
Enables the use of advanced real-time data analytics and Machine Learning (ML) to discover new parameters for credit models.
By investing in the right solution for your bank or financial institution, you can realize a host of advantages that will increase approvals while reducing risk. So let’s take a closer look at how credit decisioning software works and what it can provide.
The benefits of using credit decisioning software
There are numerous advantages to using credit decisioning software for modern-day lending. Here are the main benefits they offer:
1. Seamless borrowing experience
By automating much of the lending process, you can offer a seamless experience for your borrowers. Instead of manually verifying applicants and their financial statements, for example, you can automate the process by connecting different providers in a decisioning flow to automatically make decisions in a matter of minutes.
At Oscilar, we provide not just credit-bureau data, but over 100 alternative data sources as well to instantly give you a 360-degree view of your customers.
2. Increasing the accuracy of credit decisions
With the use of the right software, credit scoring can become more accurate. By aggregating data from multiple sources, analyzing it, and using ML models, a platform can identify patterns that humans would not be able to detect. This allows for a more comprehensive assessment & control of credit risk and leads to more accurate decisions.
3. Personalized credit decisions
In addition to being more accurate, credit decisions made with credit decisioning software can also be more personalized.
By taking into account factors such as:
Income
Employment history
Spending habits
you can provide more tailored decisions that are specific to the borrower, leading to a better customer experience and increasing satisfaction with the credit product.
4. Faster lending decisions
By automating the gathering and analysis of data, you can make a credit decision in a matter of seconds or minutes, rather than days or weeks: this is instant decisioning.
Instead of working with third-party data sources and spending engineering resources to bring them all under one hood, decisioning platforms like Oscilar combine everything into one view, allowing analysts themselves to create & deploy rules themselves.
The value is of course that you can capture value that otherwise would have been lost due to customer churn.
5. Reduced cost of loan originations
AI-powered credit scoring can reduce the cost of loan origination by up to 40% and reduce the cost of decisions on low-complexity cases.
Also, lenders can scale their operations to new geographies and higher volumes with a marginal increase in human workforce capacity.
How credit decisioning software works: automated risk assessment and more
Credit decisioning software automates the risk assessment process by analyzing applicants' financial data, payment and credit history to determine their creditworthiness. The tool ingests and processes credit risk data from credit bureaus and external data sources, as well as, income and cash flow data and runs credit models on a combination of these signals.
Advanced credit decisioning software uses predictive analytics to identify potential risks, such as defaulting on repayment or committing fraud.
Additionally, you can detect discrepancies in submitted applications and carry out automated credit scoring to make sure the results are reliable and accurate.
Credit decisioning software also monitors creditworthiness throughout the customer lifecycle, allowing lenders to update their risk assessment as needed. This ensures that they can make informed decisions based on up-to-date information about borrowers and minimize their exposure to potential losses, streamlining the credit underwriting process.
Fuel efficient growth with a credit decisioning engine
One of the biggest advantages of a credit decisioning engine is its ability to optimize: save time, resources, and costs - improving lenders' bottom line.
By automating the risk assessment process, this technology eliminates manual labor associated with reviewing applications, reducing operational costs and boosting efficiency.
Additionally, decisioning software helps to protect lenders from potential losses due to fraud or non-repayment of debt.
Finally, using credit decisioning software that can analyze alternative data sources can boost revenue by using additional risk and enabling inclusive lending practices.
Overall, decisioning processes and software can significantly improve the lending process for both lenders and consumers by providing faster decisions with greater accuracy and lower costs.
Protect your business from fraud with credit decisioning software
Credit decisioning software helps financial institutions protect themselves from potential losses due to fraud or non-repayment of debt. A good solution can detect potential signs of fraudulent activity in applications such as identity theft, false information, duplicate profiles, and other suspicious behaviors.
You can also conduct automated credit checks to verify the accuracy of information provided by customers before they are approved for a loan or line of credit.
By using an integrated fraud and credit risk management platform to both underwrite and detect and prevent fraudulent activity, lenders can minimize their exposure and protect their businesses from potential losses.
Find the right credit decisioning software for your financial institution
When lenders are looking for credit decisioning software, certain features and capabilities are essential. Here are a few things to look for in a credit decisioning engine.
Real-time decisions
The ability to make a real-time credit decision is critical. By aggregating the right data sources and automating the application of the right credit models, lenders can now make credit decisions in real-time.
Custom decisioning process
The ability to customize the decisioning process. Good engines should allow lenders to customize the workflows to fit their specific needs.
Ease of use
The platform should be easy to use and navigate so that lenders can get up and running quickly, as well as, reduce dependence on engineering resources.
Data aggregation & Machine Learning support
The platform should allow aggregating data from multiple sources, analyzing it, and using ML models that can identify patterns that humans would not be able to detect.
No-code, API-first
The platform should be able to integrate with a lender’s existing systems and infrastructure so that they can continue to use their existing tools and processes. An API-first and no-code platform is best positioned to allow that flexibility of integration.
Credit model variety
The platform should offer a variety of credit models so that lenders can choose the one that best fits their needs.
Scalability
The platform should be able to handle a high volume of transactions so that lenders can scale their business as needed.
Reliability
A 24x7 borrower experience requires credit decisioning software that offers high reliability, uptime, and 24x7 customer support.
Affordability
The platform should allow lenders to start small and scale pricing as the lender experiences value from the credit decisioning engine.
Credit decisioning software is the foundation of modern lending
Credit decisioning software is an invaluable tool for financial institutions that want to increase approvals and make faster, more informed credit decisions while also minimizing their risk exposure. Features such as automated credit scoring, data verification, fraud detection, and customizable workflows to fit the lender’s needs are staples of a good provider.
Finding the right provider for your bank or financial institution requires careful consideration of several factors. By looking for features such as:
Real-time instant decision-making ability
Customization capabilities
Easy UI
The ability to aggregate data and apply ML models
Integration flexibility, out-of-the-box credit models
Scalability and 24x7 customer support
You can ensure that you are selecting the best credit decisioning software for your organization.
If you are curious about how such an engine looks and feels in action, consider scheduling a demo with us: we are more than happy to show you what’s under the hood.
