An integrated Chatbot in your Loan Management System is no longer a luxury, but a need for your lending portfolio

Date published: 24 Nov 2023

With consumer expectations increasing, the use of artificial intelligence, machine learning and chatbots in Lending Industry has become a necessity. In a very competitive consumer lending space, overall digital customer experience gives an edge for any lender.

Lenders are starting to see the need for leveraging artificial intelligence to launch chatbot solutions, reducing costs and serving increasingly tech-savvy consumers. In many instances, chatbots are developed to facilitate two-way communication, replacing channels such as phone, email or text. The objective is to provide quick customer service and transactional support.

Most basic tasks such as outstanding balance inquiry, next due date, loan queries etc. can be handled by a bot efficiently, allowing agents time for complex issues … leading to a more positive borrower experience. Over time, artificial intelligence (AI) and new digital technologies will provide the lending industry with expanded forms of engagement, potentially moving beyond bots to digital voice interactions.

Why Use Chatbots?

The channels the borrowers use and the path they take to manage their loan account is more complex than ever. It is no longer possible to predict a single path of customer journey. Borrowers use online and offline channels, and expect a personalized and easy experience from their lenders at all steps of their journey.

Lenders must engage with their customers and members in the right way, and at the right place and time. A good integration of chatbots as part of the engagement process can provide consumers with quick and personalized interactions. Although only a few of the consumers are currently using chatbots, most think they will make more use of chatbots in the coming years.

There are many reasons to use a chatbot for consumer engagement in lending.

1. Cost savings

Chatbots are relatively less expensive compared to the human equivalent. Chatbots can well be integrated into your LMS thereby using the same infrastructure and resources allocated for the LMS.

2. Ease of use

Chatbots are more intuitive and easier to use than traditional customer servicing channels. Customer experience can be personalized over time through machine learning.

3. Conversational interface

Most times people find phone calls tedious and slow as compared to instant chat. Customers are looking for speed and personalization when interacting with their lenders. At the same time, they don’t want the impersonal experience of email or online forms. Chatbots offer a mix of both live conversation and speed.

4. Lead Capture

Long loan application forms, incomplete information, and lack of an immediate touchpoint are key reasons why prospective borrowers drop off. Lenders can use a Chatbot to meet the needs of tech-savvy, information-hungry and ever-demanding customers.

Chatbots can engage prospective borrowers through notifications, prompts & triggers to draw attention of customers visiting the website/app, and prevent drop-offs.

Chatbot when closely integrated with the LMS can underwrite and score the loan applications instantly should the customer opt to apply through the Chatbot.

Chatbots can also trigger the e-sign workflow once the leads are qualified. Chatbots can potentially be alternative to take-in leads without much hassle and delay.

5. 24/7 digital support

A 24/7 instant chat feature is expected by the increasingly digital ‘always-on’ consumer. Moreover, Chatbots can be deployed to handle customer queries across all digital channels e.g. website, mobile apps, messaging platforms like slack, Facebook etc. This means that lenders with chatbots built into their websites have a competitive advantage and are likelier to attract and retain customers.

Simple, repetitive Level 2 queries, FAQs can be addressed by the chatbots instantly while Intelligent auto-routing of complicated queries to live agents for more detailed attention. In addition, Chatbots can be used to collect qualitative and quantitative feedback about the lender’s service offerings.

6. Collections

Having a successful collection process and strategy is paramount for any lender to run a profitable portfolio. The agents handle an influx of inbound calls ranging from borrowers wanting to make a payment, updating account information, deferring payments and more. Using Chatbots for certain parts of the collections process and Live Agents for others would drive revenue without adding staff, decrease agent handle time, cutting overhead, reducing operational risk, and impacting several other key areas that can be directly tied to the bottom line. Furthermore, Chatbots will be available round the clock, so borrowers can make payments and complete transactions at a time that is convenient for them.

As with any digital innovation leveraging machine learning and artificial intelligence, the benefits and limitations of using chatbots are changing over time as more lenders are realizing the need for Chatbots. At this time, chatbots used in lending industry have limited functionality compared to advanced chatbots being used in other financial sectors like banking industry.

The limitations below are general in nature without every chatbot having these limitations.

  • The dialogue capability can be limited to a very specific set or format of questions based on the use cases defined.
  • Chatbots cannot hold the conversation which means it cannot answer multiple questions at the same time.
  • Not all consumers are familiar with or comfortable with chatbots because of their limited understanding.
  • Many lenders still use legacy LMS Platforms that doesn’t offer an easy way to automation and integration of features like a Chatbot.

Despite these limitations, there is a growing consumer acceptance of automated solutions in the recent past. Consumers are increasingly willing to interact with automated solutions to complete transactions that previously required live agents.

SparkLMS being a fully automated Loan Management System with an integrated Chatbot feature, the role Chatbot can start right from the very first click on the website by the borrower to disbursement and final repayment of the loan. Data can be collected at every step for analytics and to create patterns that give lenders an edge in managing the customer and defining loan products. Even the Brick and Mortar Lenders need to co-opt these technologies and use SparkLMS for stronger profitability, rollout of online only products and reduce operational costs related with managing their physical stores.

Thanks for taking time to read through this article. Contact us today if you want to engage with us for your Lending Portfolio.