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  • Writer's pictureW.B. King

Reducing Friction in Lending: Origence and Pacific Service CU Share Insights in New White Paper

Updated: Jun 28, 2023

By W.B. King

While the credit union industry’s “member first” philosophy has long instilled loyalty and trust, in recent years challenger banks and fintechs have been vying for more market share, especially in lending. To address this issue, Origence recently published How Credit Unions Can Use Technology to Reduce Friction in the Lending Process (April 2023).

“To maintain that high level of consumer trust, credit unions must ensure their technology keeps pace with consumers’ expectations for seamless digital interactions,” the report noted, adding that credit unions have to “lean into consumer-focused loan products while upgrading the technology that powers their underwriting business.”

Traditionally, a credit union’s “consumer-centric structure” offers products that cost-conscious borrower’s desire, the report noted, including loans with lower interest rates and more manageable monthly payments.

“When borrowers shop for more favorable loan conditions in response to economic pressures, many turn to credit unions,” the report stated. “To fully capitalize on borrowers’ increased interest, credit unions must remove barriers to entry like non-intuitive, time-intensive application processes.”

Modern LOS

With the right technology in place, the Irvine, Calif.-based Origence, a credit union service organization (CUSO), said a credit union “can modernize your lending processes to keep pace with digital-native competitors, enabling you to retain members and attract new borrowers.”

To better define a “modern” loan origination system (LOS), the report said the following features are required: intuitive, mobile-first user experience (UX); automation capabilities, including for custom processes integration with artificial intelligence (AI) tools; integration with compliance tools; improved data management; and ability to scale with a business model.

“It’s not just about getting applicants in the door — a cutting-edge LOS can help you increase approval rates without assuming more risk,” the report stated. “AI and auto-decisioning tools use models designed to identify borrowers with nontraditional credit profiles so you can say ‘yes’ to more applicants, even in a tough economy.”

Since each credit union in unique, the report also said that it is critical the LOS can adapt to changing workflow needs.

“Within the LOS platform, you can configure customized policies, procedures, and workflows to meet your exact criteria,” the report noted. “These include employee-specific or level-specific rules to ensure requests and action items automatically route to the employee best equipped to handle them.”

Intuitive, Simple Functionality

Pacific Service Credit Union deployed the Origence arc OS loan origination system, previously known as Lending 360. After adopting the platform, the $1.4 billion Concord, Calif-based credit union, which serves more than 67,000 members, is now able to instantly approve 40% of online applicants. The result after the first year of use was 58.5% net growth for its consumer loan portfolio.

“We are facing unequaled competition from fintech solutions that are faceless…you cannot reach a live person that makes decisions or exceptions in that world, but you can at your credit union. This is our secret sauce,” stated Hemlata Patel, vice president and chief lending officer at Pacific Service Credit Union.

Today, the credit union processes all its consumer loans on the LOS, including direct and indirect auto loans, credit cards, second mortgage/home equity loans and credit lines, motorcycle/RV/boat loans and unsecured loans.

At year-end 2021, Patel noted that the credit union reported 0.04% in delinquencies with an approximate average 0.23% charge-offs (since implementing the LOS). At the end of the second quarter 2022, Patel reported continued growth. “We are at 7.1% net loan growth with no mortgage balance increase year to date.”

Patel further explained that the LOS’ underwriting efficiencies allowed the credit union to improve the quality of indirect deals, while closely tracking loan performance. The credit union also utilizes the system’s online and mobile loan application tool and now receives 60% of its loan applications through digital channels.

“The return on investment (ROI) has been truly exceptional,” Patel noted. “The LOS is easy and flexible, and we can train new users in almost no time thanks to its intuitive, simple functionality.”


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