Chances are that loan applications begin and end at your LOS provider. For many Credit Unions this is a portal offered from MeridianLink (LoansPQ), L360 (Origence), or Temenos. And while these software solutions are a great “1 size fits all” solution to consumer lending, we’ll examine the exact efficiency of these lending funnels.

Where do applications come from?

We generally view applications from two primary sources:

• Online or Mobile Banking: These applications are from existing Members.

• Guest Portals or Applications: These applications are generally from new Members (although a small percentage of existing Members take this short-cut, too).

The mix of applications varies heavily depending on the marketing efforts of a given Credit Union. A Credit Union with great brand awareness, geographic reach, and a “brand” for a given loan product tends to get a far greater portion of new guest applications than small/regional Credit Union with limited marketing budgets.

In general we see a mix of:

Net conversion from Online Lending portals

In total, about 1 of 3 applications applicants submit a completed loan application. There are a huge number of dropoffs along the way. In general, there are two types of dropoffs we should examine:

Desired Dropoffs: These are candidates or submissions who would never have been approved for a loan. If they don’t complete the application, this is net beneficial for the Credit Union since many LOS systems charge by application, and since an application that won’t fund is both bad use of labor and adverse action letters.Undesired Dropoffs: These are candidates or submissions where the loan would have funded and been a good Credit Union Member (think of a high FICO score applicant). For many of these applicants it’s hard to understand why the applicant dropped off, but we can illustrate how many we’re losing.

Where do Dropoffs happen

Since only 1 in 3 applications converts, let’s examine where these dropoffs occur. In a typical loan application portal figures look like the following (please note the steps are substantially similar for most loan applications).

The largest dropoff occurs at the “app start” where bounce rates, abandons, and the applicant most closely considers whether they want to proceed.

What to do

Most loan applications end up being unnecessarily complicated and lengthy without giving the user any reward or indication of approval. Rather than requiring multiple forms to fill out why not:

• Reduce the burden and eliminate fields that don’t influence decision making

• Get the user/Member to “what could my loan look like” with partial information to prevent abandons

• Collect as much data possible via APIs or through passing user information from Core

In this article, we intended to demonstrate the importance of identifying whether a dropoff is desirable or undesirable and where exactly in the application process does it tend to take place. By making such process easier and collecting user information more effectively, undesired dropoffs can be reduced, and both CU's and candidates' experience is likely to be optimized.

What does this mean for my Credit Union?

What can I as a Credit Union leader do today to increase the conversion of my loan application portal or get the most out of our marketing spend?

• First and foremost, confirm you have analytics in place to track you applicants

• Secondly, compare conversion rates by (marketing) channel

• Surface rates and loan decisions before forcing an application to submit

• Reduce labor by reducing applications that are unlikely to fund

• Focus all your efforts on applicants that make it through knowing their rate

Our next piece will examine even more concrete opportunities to increase look-to-book and monetize your existing loan application volume! As always, if you’d like to discuss potential solutions and how digitized lending experiences can help, feel free to reach us out at contact@withclutch.com.