Guest Editorial by Ryan Coleman, Business Development Manager - Consumer Finance, Equifax Workforce Solutions
In a world accustomed to fast-paced interactions and transactions, members expect a similar lending experience and demand faster decisions. The minute a member hits submit on their application, the timer starts. When members don’t get a quick decision, or if a credit union follows up asking for more information, the member may move on.
Quick responses can be overwhelming and challenging for credit unions, especially if systems are not automated and require pulling the data needed to make informed and timely decisions. Credit unions still following the outdated paper-based process of gathering applicant information end up spending more time on each loan, which can result in decision delays, member dissatisfaction, and increased lending risks if insufficient or incomplete data is collected.
Technology has transformed how successful credit unions now do business, especially when it comes to accessing the right data efficiently for lending decisions. Credit unions can leverage relevant data at every stage of the lending process to improve the member experience. Implementing digital verifications, such as verification of income and employment (VOIE), is key to achieving a more consistent, faster, and better-informed loan decisioning process that can meet member expectations while also protecting the credit union from unnecessary risk.
Automate Workflows and Verifications
How credit unions retrieve automated VOIE during the application process is vital to remaining competitive in today's lending landscape. Technology allows credit unions to adopt an enterprise-wide, standardized loan decisioning framework based on integrated income and employment data from a single source. Implementing VOIE can help credit unions make informed decisions faster, thereby reducing the chance of losing the applicant to competition. Speed and consistency can make or break a deal.
Since automated VOIE minimizes reliance on consumer-provided documentation, such as W-2s and bank statements, and consumer-permissioned accounts, it also helps to decrease credit union's reliance on untimely processes that can lower the potential of member acquisition.
Also, relying on automated digital VOIE may help to decrease errors when determining an applicant’s ability to repay loans. Automated VOIE incorporates the credit union’s view of applicants’ ability to pay a loan into their decisioning model, which can also lead to a significant lift in member conversion rates over traditional or paper-based models. In fact, recent Equifax data suggests loan applicants are 40% more likely to be funded when lenders use third-party income and employment verifications in the decision process.
Built-in decisioning criteria can create an environment where every loan decision is seamlessly backed by data, potentially reducing cost, labor, errors, and oversights. Integrating automation and decreasing reliance on paper-based VOIE reviews can allow for more confident lending decisions by credit unions and potentially lower default rates.
Utilize Secure Data
While Member-provided documents and permissioned data are viable options for verifying a borrower’s income and employment, they bring risks and challenges. Having members provide these documents increases consumer friction, especially if they must personally track them down.
Implementing digital VOIE during the application process can also make data transfers safer and faster by removing paper-based processes that could trigger other issues, such as the potential for inflated stated borrower income. Integrating VOIE into a credit union’s workflow allows an encrypted and secure direct connection to a database that transmits member data that is provided directly from employers and payroll providers.
Credit unions that implement automated VOIE can transfer data securely, capture more accurate financial strength indicators, reach better-informed lending decisions faster and, potentially, observe an increase in conversion rates of member applications. VOIE implementation allows them to better meet member expectations and demands in today’s competitive lending environment.
Ryan Coleman leads Business Development for Consumer Finance and The Work Number at Equifax Workforce Solutions. Ryan has 20 years of experience in Data and Technology Solutions for Credit Unions, Banks, and other Financial Institutions.
 Equifax Internal Study of The Work Number Inquiry Data, December 2018 - December 2019 United States consumer finance loans. Individual results may vary.