Digital Shift: Partner with a Lending Platform or DIY Tech?

Digital Lending Platform

Digital lenders have changed the perceptions around loan processes in the financial services sector. While many banks and credit unions have generally taken a fairly conservative approach to innovation, the ability to use risk analytics to accelerate loan processes and expand the potential customer base has forced firms to pay closer attention to it. This has left many organizations facing a difficult decision: Is it best to partner with an existing lending platform and implement its services or deploy in-house technologies to create an internal digital lending setup?

The partnership option
An American Banking Association report highlighted the attractiveness and potential of partnering with an existing digital lending solution. According to the report, many institutions, particularly small to mid-sized firms find themselves in a situation where the digital lending boom gives them an opportunity to set aside longstanding conservatism and gain a competitive advantage that drives growth. This is partially possible through the simple act of partnering to gain a technical advantage without investing in new technology, but also because of how many relationships are structured.

The news source explained that many digital lending providers will actually offer the solution they’ve built their business on as a completely white-label system. This means that you are effectively incorporating a third-party specialist into your organization, but you can fully brand everything it does to create a cohesive user experience.

Digital lending is proving disruptive.

The tech deployment option
While a partnership lets firms brand their digital lending system, deploying a dedicated solution provides more control over the features, processes and capabilities of the platform. This can present a slightly more daunting implementation curve than a simple partnership, but could provide more potential value over time. Furthermore, controlling the entire IT stack can make it easier to deploy new technology as it emerges instead of relying on a lending partner to update its services.

A Maximize Market Research study fond that the global vendor risk management analytics sector is expected to expand at a compound annual growth rate of 16.7 percent for the 2016 to 2026 period. In many cases, organizations are implementing advanced risk analytics software and similar solutions to keep up with the rapid rise of new technologies while also maintaining service quality and efficiency.

Which is right for you?
There isn’t an easy answer to this question. Every firm will come into this decision from a different perspective, but here are a few questions you can ask about your organization along the way:

Are we better at managing third-party partnerships or IT infrastructure?
What are our long-term IT and business growth strategies and how do they impact current plans?
Does our customer base have any pre-existing trust or technology use issues that could influence our decision?
Considering our lending volume, how long will it take to start generating returns from a system investment or, conversely, will a partnership increase revenues enough to justify costs and complexity?

These aren’t easy questions to answer, but GDS Link can help you whichever option you’re leaning toward. We offer robust consulting services for firms engaging in digital lending, provide a sophisticated, modular risk analytics platform and work with many digital lending organizations, giving us expertise in what partnerships often look like. Contact us today to learn more.