The lending industry has seen a proliferation of new technology in the past decade, and today's leading lenders know that technology can help them scale portfolios without scaling headcount. But it's not always clear where to start. How should you think about categorizing the different capabilities you're considering, and how should you sequence your technology buildout as a specialty lender, credit fund, or bank?
Understanding core competencies in lending technology is essential for credit and operational leaders aiming to prepare their firms for growth. We group core competencies in lending technology into three categories: foundational, competitive, and best-in-class.
Tackling these in the right order is the best way to make sure you build and sustain a competitive advantage in lending.
Foundational Competencies: Establishing a Data Foundation
Foundational competencies serve as the backbone of lending operations. At a fundamental level, operational leaders at lenders must ensure that basic processes are executed efficiently, accurately, and consistently.
These foundational competencies remain the same across all corporate lenders, whether they are specialty lenders, credit funds or banks. The four foundational competencies are:
- Loan Origination. Loan origination systems (LOS) are crucial for streamlining the initial stages of the lending process. From application intake to credit assessment, a robust LOS lays the groundwork for an efficient borrower experience. The key benefits of a strong loan origination system are minimized manual errors, faster time to approval, and improved borrower satisfaction.
- Transaction and Portfolio Entry. Accurate data entry is essential for accurate servicing and performance monitoring. This competency ensures loan data is accurately recorded, whether it’s for a single transaction or an entire portfolio.
- Loan Servicing and Invoicing. Loan servicing involves managing payments, tracking outstanding balances, and generating invoices or statements for borrowers. A reliable servicing system supports seamless operations while reducing administrative overhead.
- Investment Reporting. Transparency is vital for lenders and investors. Foundational reporting systems must provide clear, concise insights into portfolio performance, interest payments, and other financial metrics.
Competitive Competencies: Gaining an Edge
Competitive competencies build on the foundational layer, equipping lenders with the tools to optimize workflows, manage relationships, and meet regulatory requirements.
Importantly, it's not worthwhile to build out these capabilities unless you're confident in your foundational competencies, since you won't have high confidence in the accuracy of your underlying data.
- Data QA and Validation. Clean, accurate data is a cornerstone of effective lending operations, particularly for lenders that have a high volume of transactions that cannot be monitored manually. Automated quality assurance (QA) processes and validation tools identify errors and inconsistencies (e.g., metadata that has changed) early, preventing downstream issues.
- Borrower Management. Effective borrower management and communication goes beyond servicing loans—it focuses on building lasting relationships with credit fund or bank borrowers. Tools that centralize borrower communication, document sharing, and status tracking enhance engagement and retention.
- Compliance Monitoring. Covenant and regulatory compliance are some of the most challenging aspects of scaling a lending business. Automated compliance monitoring tools reduce the risk of violations by tracking key metrics and providing real-time alerts.
- Portfolio Queries and Analysis. Access to sophisticated portfolio analytics allows lenders to identify trends, assess risks, and forecast performance. Querying capabilities provide granular insights that drive informed decision-making.
Best-in-Class Competencies: "Future-Proofing" Your Firm
Best-in-class competencies sit at the bleeding edge of lending technology.
They differentiate industry leaders from their peers by making the most of the process improvements and data built up via the Foundational and Competitive Competencies. Again, however, it's best to wait to pursue these capabilities until you're confident in your data foundation and compliance stance.
- Process Automation. Automation of repetitive tasks such as document processing, borrower notifications, and loan servicing eliminates bottlenecks and enhances productivity.
- Portfolio Alerting. Advanced alerting systems leverage real-time data to notify lenders of potential issues or opportunities via email or Slack. Examples of important alerts to consider include significant shifts in borrowing base capacity or undercollateralized loans.
- Scenario Modeling. Predictive scenario modeling tools allow lenders to simulate different hypothetical market conditions, evaluate potential impacts on portfolios, and devise contingency plans.
- AI-Powered Capabilities. AI-driven insights in lending can help improve underwriting accuracy and speed up analysis (e.g., via AI-assisted SQL queries).
The Road Ahead
Knowing where you stand is the first step to building a long-term technology roadmap and remaining competitive in the lending space. To succeed in making the most of technology, leaders at lending institutions must continually assess and upgrade their core competencies, while also making sure they're tackling the right challenges at the right time. In the future, we'll provide a blueprint for assessing your firm's technological maturity.
Want to learn more?
Finley is the first portfolio management platform built to streamline lender-borrower and lender-lender relationships in addition to optimizing internal operations and analysis. Top asset managers use Finley to centralize, digitize, and automate everything from interest and fee calculations to performance trend cards and compliance triggers.
If you're interested in learning more about software that can help you streamline your corporate loan management, just schedule a demo. We'd love to chat!
