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Technology and Innovation in Commercial Lending: Shaping the Future of Business Financing

  • Post category:Innovation

Commercial lending has seen its fair share of evolution over the years. Technological advancements have had a particular impact on commercial lending as they have transformed what used to be a very paper-intensive, tedious and manual process riddled with slow decision times and inefficiencies.

Technology has adapted to overcome challenges the industry has faced, notably providing lenders with solutions to streamline their workflows. And in doing so, lenders have been able to do more business. This is evident in the upward trend the industry has seen since the hit it took during the pandemic. In fact, the commercial lending market size was valued at $8,823.53 billion in 2020, and is projected to reach $29,379.83 billion by 2030, growing at a CAGR of 13.1 percent from 2021 to 2030, according to Allied Market Research. In 2024 and beyond, we’ll continue to see how technology will contribute to the expansion of this competitive and fast-paced industry.

Drivers Behind the Change

Today’s borrowers are digitally savvy and expect a seamless, fast, convenient and personalized experience. Industry leaders have risen to the occasion as fintechs and alternative lenders have entered the market with innovative technology to meet the new expectations. More and more companies are exploring the possibilities with artificial intelligence (AI). AI is advancing to where it has the potential to help make far better and faster use of data than other technologies and free up time and resources to organizations.

Data-driven Decision-making

Before innovation touched the industry, lenders were wrapped up in tiresome manual processes and analysis, which oftentimes led to errors. Accuracy in decision making is a big concern for all lenders. Now, AI can continuously monitor and analyze data for real-time insights and recommendations for lenders. AI can take a slew of historical data and real-time information to identify patterns and anomalies. It can make predictions about borrower creditworthiness by creating synthetic data resembling real-world examples, improving the credit risk assessment process.

Being able to respond quickly to market changes, adapt strategies and jump on opportunities is paramount to lenders in a competitive marketplace.

Streamlined Underwriting Processes

One of the many overall benefits of AI is that it has automated manual tasks, leaving people to focus their time on revenue-producing work. The underwriting process has been graced by this automation with data collection, analysis and verification to speed up processing times. As borrowers seek quicker turnaround times from start to funding, commercial lenders using advanced loan origination software are able to meet customer expectations.

Enhanced Fraud Detection and Risk Management

It’s crucial to have a fraud detection system in place to protect businesses and customers from financial losses. AI algorithms spot fraudulent actions by analyzing multiple data points and customer behavior patterns, and automatically flagging them for further investigation. AI can monitor account activity and transactions in real-time for better decision-making.

Personalized Customer Experience

Customers demand a personalized experience these days to a point where the experience is sometimes more important than the product or service itself. Generative AI uses chatbots and virtual assistants to promptly address borrowers’ queries, send personalized loan recommendations and enable self-service options for managing their accounts. AI algorithms analyze historical data and individual borrower profiles to generate customized loan options, including amounts, repayment terms and interest rates, that align with the specific requirements and financial capabilities of each business. This leads to greater chances of loan approval––and faster approval––plus a happier, more engaged customer.

Leveraging AI with Modern Loan Origination Software

As advancements in AI are constantly being made, more opportunities for enhanced user features and reduced manual work will open up. The use of AI is certainly only ramping up. Advanced lending origination software will continue to leverage this powerful technology to meet customer needs while streamlining the process and saving time for both lenders and borrowers. Lenders who can provide this functionality to their borrowers will have a competitive edge.

Decipher Credit uses AI in several steps throughout the commercial lending process. We can use AI-driven technology to facilitate uploading of accounts receivable information, financial statements and other key data for instant processing and spreading. This saves the lender the trouble of having to look at reports manually. With the use of several different formats, this is game-changing for lenders. To see a demo, reach out to our team today.