What Innovative Advantage Does Cloud Lending Give Community Banks?

For a community bank moving its lending operations to the cloud, the crucial difference is where information is stored and authenticated. For a borrower, the most salient fact may be that the cloud allows a loan application to be submitted from anywhere and in any type of dress.

“Cloud lending is deliverable over the internet, which these days is typically hosted on cloud-related servers,” says Ted Tekippe, CEO of ZimpleMoney, a cloud-based platform for private lenders. “This allows financial institutions the flexibility to work with different third-party providers that can focus on technical expertise and offer their solutions in a scalable environment that helps banks and their customers better meet both of their needs.”

Community bankers have been quick to grasp the appeal. “We’re using the cloud for a number of solutions,” says Brad Tidwell, CEO of VeraBank in Henderson, Texas. The $4.3 billion-asset community bank began using the cloud for lending three years ago. Already, Tidwell says that his bank has reaped impressive gains in efficiency, as well as lowered costs.

Customers appreciate the convenience of an automated loan-application process and have raised few concerns about their information being stored in the cloud. “I don’t think customers care how the sausage is made. They just care that it tastes good,” says Tidwell.

“Cloud lending enables faster transactions and more efficiency for our customers. And as AI catches on and is adopted in new ways, there’s no telling what the future holds.”

—Ronald Nix, VeraBank

Building confidence in cloud security

Storing critical information off premises—or in the cloud—was initially an angst-provoking proposition for some bankers. Fears about security and loss of control nagged at them, even as cloud-solution providers maintained that information within their servers was safer than what was typically stored on a bank’s own premises.

Cloud proponents also point out that manual lending processes have drawbacks, but these drawbacks are so well understood that they no longer spark concerns.

For instance, Michael Chung, general manager of commercial lending at nCino, points out: “Traditional manual lending processes come with their own limitations, such as slower processing times, higher operational costs and increased potential for human error.”

Cheryl Anderson, director of product management at Finastra, maintains that cloud lending solutions beat other options because their providers invest heavily in the latest safeguards. Finastra has, for instance, partnered with Microsoft “to make sure that our cloud-based solutions [enable resilience and security],” she says.

Anderson urges community banks to calculate the ROI for cloud lending versus traditional methods. “Banks are finding that when they’re keeping things on their own premises, they have to expand their IT costs to keep everything safe,” she says.

Simplifying the borrower journey

One of the chief advantages of cloud lending is that it removes some of the major hassles customers have historically faced, according to Anderson. 

“Start with the ability for your borrower applicant to be at home in their pajamas when they get on the internet and apply for a loan,” she says. “They don’t have to come into the bank. They don’t have to start writing things down on a piece of paper. They can do everything in their personal time when they’re comfortable doing so. That’s really beneficial for the borrower.”

Jettisoning the initial branch meeting and going straight to a decisioning process is another benefit of technology, says Ronald Nix, chief technology officer at VeraBank. He notes that his community bank sends a link either through SharePoint or through nCino’s system to create a portal into which documents can be dragged and dropped. 

And thanks to DocuSign, customers don’t even have to come into the branch to sign the completed loan documents. “Folks are very busy,” says Nix. “And so, while at the end of the day what borrowers want is the money, convenience is a big factor, too.”

Some cloud-solution providers focus on origination, while others—like ZimpleMoney—concentrate on loan management. Tekippe explains how using a cloud solution for loan management makes it easier for customers to update contact information, initiate additional payments or automate loan payments—all while receiving regular online notifications about actions they need to take. 

Cloud lending and AI synergy

Looking ahead, cloud-based lending may facilitate new uses for AI, which, as Tekippe explains, relies on large data sets and multiple users for its success.

Even now, ZimpleMoney has begun using AI for customer support. “Our AI chatbot learns from all of our customer support inquiries and can get information users need in a much more targeted and rapid way than traditional customer support,” says Tekippe.

VeraBank’s Nix is convinced that community banks are well positioned to take advantage of fast gains in cutting-edge technology. “We’re giving our customers access to technologies that, at one time, only the big banks could offer,” he says. “Because we’re nimble and can change faster, we’re doing as much in terms of technology as they are—perhaps even more.”

Looking at the future of cloud lending, Nix says: “Cloud lending enables faster transactions and more efficiency for our customers. And as AI catches on and is adopted in new ways, there’s no telling what the future holds.”