5 things to avoid when choosing a loan management system
A loan management system (LMS) can automate lending processes, enhance the customer experience, and reduce administrative time and associated costs. This translates into long-term tangible cost savings for loan providers.
Lending is a core function of the finance industry and embracing innovations helps businesses remain competitive in a changing environment. Using an LMS has a variety of benefits, and whether you’re a fintech lender or bank, your company should definitely be using an LMS solution.
Still not convinced you need to use an LMS? From saving time and money to reducing human error, there are a myriad of reasons your company should be automating as many lending processes as possible. If you’re on the fence about needing such a solution, first check out our guide on the “Top 10 reasons every loan provider should use a loan management system”.
What is a loan management system?
An LMS is a lending solution that facilitates end-to-end lending processes for both online and offline operations. A full lending lifecycle management system enables lending processes to be fully automated, from customer onboarding through to loan origination, loan servicing, collateral management, warnings and debt collection.
You should always choose an LMS solution that you can customise to fit your business needs. Your company will have a specific checklist of requirements when choosing an LMS, in fact, we have a whole blog on “How to choose a loan management system that’s right for your company”. However there are many things you should also avoid when trying to find the perfect loan management solution. Keep reading to find out more.
What to avoid when choosing an loan management system
1. Vendor lock-in
What happens when an LMS isn’t performing up to your business expectations, or the provider simply isn’t fulfilling the requirements listed in the service-level agreement? This is the major business continuity risk that you may experience when cooperating with a third party vendor. Make sure there is an exit strategy which is either walk away and migrate to a different vendor or in-house developed system, or an opportunity to purchase the LMS source code and continue system maintenance and further development with your own or outsourced IT resources.
In order to perform system migration, make sure the contract doesn’t have provisions that create a financial burden for leaving, and most importantly, ensure that your company can retain all of your data when you migrate to another system. Don’t wait for the LMS provider to go under before you establish what will happen to your data.
2. Coding requirements
LMS providers offer various degrees of no-code customisation opportunities. If you’ve chosen a cloud solution, then you want to opt for a no-code or low-code LMS to save your business both time and money. A well-designed SaaS solution won’t require an IT team to customise each feature required by your business – product setup, scoring, templates and communications should be easily adaptable to your operations by any employee. No-code systems will also allow your employees to spend less time maintaining the LMS.
The lack of code writing doesn’t necessarily mean you won’t require any customer support when setting up or customising your new system, but it will definitely be more logical and intuitive. Implementing and maintaining a no-code system still requires skill, although you won’t be required to write any code. No-code systems include pre-built modules that you can then customise without the need of a programming team. Features include such aspects as drop-down menus and drag-and-drop options to simplify the functions.
3. Narrow product catalogue
An LMS solution won’t be of any use if it doesn’t cater to your specific financial product or service. Whether you’re creating a product from scratch or choosing to customise from a product catalogue, the more versatile the system, the better. Not all systems accommodate non-standard business models, such as long-term rental or rent-to-own products. To make the most of a solution, it should not only cover automation of all your business’ current lending processes, but also include additional features your company may require in the future.
Your lending business must be equipped with the tools it needs to scale and achieve its economic objectives. By choosing a scalable LMS, you allow your company to add new products and diversify your service offerings with ease. This means you can introduce new products quickly and cater to emerging markets to take advantage of growth opportunities and increase profit margins.
4. System incompatibility
When choosing an LMS, make sure it can smoothly integrate with any third party services you’re already using in your operations, or plan to use. Whether you need data access, scoring, payment solutions or IP telephony, your chosen system should be able to integrate with all the solutions your business needs to operate at full potential. A new LMS should also be able to leverage any existing system your company already has running, such as a data connector or decision engine.
If your company already uses an array of business intelligence (BI) tools, choose an LMS that can connect any accountancy and analytics systems to the database and use third-party analytics tools to enhance data analysis. For best results, choose software that allows you to customise any section of the reports and configure the system in the specific ways to suit your requirements.
5. On-premises solutions
On-premises solutions shouldn’t be outright avoided, but your company should definitely take the time to evaluate whether such a solution would be a good fit. While an on-premises system ensures customisation options specially designed for your business needs, the technology can quickly become antiquated and require expensive updates.
A software as a service (SaaS) solution, on the other hand, ensures continuous overall system development and functionality over time. However there is still a caveat to look for when choosing an SaaS system – go with a vendor that also provides custom solutions on top of the standard LMS solution. One of the ways to ensure that your chosen LMS fits your business needs is to provide for custom programming hours in your contract. To find out more about the difference between on-premises and SaaS solutions, read our blog devoted to the topic.
FIS.solutions has been supporting business for over 10 years by providing an out-of-the box, yet fully customisable loan management system. On top of our core system, we deliver integration services for custom feature development and system connections. With hundreds of projects under our belt and more that 50 clients around the world, FIS.solutions has the industry expertise to take your company to the next level.
Whether your business requires our full system or just individual modules – our products are specifically created for instalment loans, auto leasing, mortgages, line of credit, buy-now-pay-later, payday loans, invoice factoring and more – we’re confident that we have the solution that’s right for you!