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3 Challenges Facing the Lending Market and How to Overcome Them

Jay Cherrie, Industry Lead, Financial Services
March 22, 2022

The financial services industry, like so many others, has undergone long-lasting changes in recent years. With the emergence of new technologies, new regulations, and unprecedented market changes, institutions have had to contend with unpredictability and rising consumer expectations.

To effectively manage constant change, financial firms have to find a way to balance innovation and efficient process execution with risk. The following three shifts have made it even more difficult to navigate an already highly regulated industry.  

1. The volatility of lending rates.

Though mortgage rates around the world recently hit historic lows, they are starting to rise and are anticipated to continue to do so. While evolving interest rates are to be expected as the market experiences changes, they put pressure on lenders to minimize approval time for applicants. The same goes for commercial lending—financial institutions must quickly assess risk and meet customer demands while still tending to the bottom line. 

2. The final days of LIBOR.

As of the end of 2021, new loan contracts may no longer be indexed on LIBOR, and alternatives have only caused confusion for lending institutions. And adding to that confusion, an extension has been granted for existing contracts to use LIBOR through 2022 in the UK and into 2023 in the US.

3. The rise of ESG. 

Environmental, social, and governance (ESG) lending is on the rise as consumer demand calls for ESG-friendly investments. In the first 11 months of 2021, more than $649 billion was invested in ESG-focused funds worldwide, up from $542 billion and $285 billion in 2020 and 2019, respectively. Financial institutions must reprioritize to meet the rising demand for ESG-friendly lending and adjust internal processes to account for it as well. 

Agility is the name of the game.

So much of the financial services market is ever-changing, making it crucial for financial organizations to be able to adjust when market conditions and regulations change. Problem is, financial institutions’ legacy technology doesn’t enable them to be agile. Teams that work together to meet an institution’s goals and serve clients aren’t given the tools they need to optimize service delivery.

The reality for so many institutions is disjointed data spread across many systems and manual workflows that take time away from value-driven work. A unified low-code platform eliminates the need to replace these legacy lending solutions and instead, brings them together to enable faster, more informed decision making.

A unified low-code platform changes the game for financial organizations.

Financial institutions can be more agile and better adjust to change in the industry with low-code thanks to these benefits: 

  • Native automation functionality to improve efficiency, including artificial intelligence and machine learning.
  • Fast, flexible, and simple integration across all loan categories—consumer, commercial, and wholesale lines of business.
  • Adherence to local, product, and customer-specific regulatory guidelines.
  • Improved visibility for a shorter time-to-decision and better credit evaluations.
  • Enablement of employees to engage in risk analysis and customer relationship management rather than mundane, administrative tasks.

Low-code can help your financial organization stay competitive and meet changing regulatory requirements while also making it easier for your staff to do their jobs efficiently and effectively. Learn how in our whitepaper, Winning Strategies to Remain Competitive in Today’s Lending Market