Loan origination software manages lending tasks, including origination, underwriting, closing, and documentation for contract servicers, title companies, credit unions, government agencies, and private lenders. The software offers a broad range of advantages, such as mitigate risk and enhance decision making, enhance staff productivity with automated workflow and collaboration, increase staff efficiency, improve external and internal communication, and enhance customer experience with reduced decision turn-time.
A surge in the adoption rate of automation in the BFSI sector, the advent of new companies in the BFSI, and the IT sector and technology advancements are the factors bolstering the market growth. However, the growing cyberattacks and breaches are hampering the loan origination software market growth.
The global loan origination software market was valued USD 3.7 billion in 2019 and is presumed to reach USD 8.1 billion by 2029, growing at a CAGR 13.2%.
The BFSI Sector’s Extensive Automation
The BFSI sectors are significantly adopting advanced automation technologies to enhance cost savings, increase productivity, and enhance customer experience. Furthermore, Artificial Intelligence (AI) is one of the primary drivers of automation, which has helped the banking sector in developing a better understanding of its customer’s behavior. It has also enabled banks to recognize the customer’s choices based on their previous interactions, transactions, and prevailing trends. This allows financial institutions to adopt loan origination software to improve customer engagement, thereby building strong customer relationships.
A Gamut of Benefits Offered by the Cloud Segment
By deployment mode, the cloud segment holds a higher CAGR and is presumed to grow during the forecast period. The growth is attributed to benefits offered by the segment, such as quick implementation, lower costs, ubiquitous availability, scalability, legacy interaction, continuous software updates, easy to process a large number of loan applications, among others. Moreover, by using a cloud-based loan processing system, banking and financial organizations can surely gain an edge over their primary competitors, thereby bring in dynamic work culture in the marketplace.
In 2017, 3530 Technologies, a provider of integrated technology solutions and services to banks and financial institutions across the U.S., adopted cloud loan origination software to overcome the flaws in the existing loan origination system and to maintain a competitive advantage in the fast-moving corporate loan market. In light of this implementation, the company is now able to automate the approval or rejection of applications.
BSFI Sector’s Adoption of Innovation Technologies Drives the Solution Segment Growth
By component, the solution segment holds a higher CAGR and is presumed to grow during the forecast period. The growth is attributed to an increase in the adoption of innovative technologies across the BFSI sector to improve staff productivity and bring forth customer satisfaction. The solution includes; retail or customer lending, commercial lending, small and medium business lending, small business administration’s lending, and mortgage lending, among others. Furthermore, these solutions facilitate flexibility and adaptability to keep financial institutions future-ready.
In 2018, Credifranco, a US-based NBFC, implemented the Habile Technologies loan origination software solution to overcome the challenges, including allowing the user to extend the loan and cancel extension with the necessary authorization and ability to cater to the growing volume and demand among others.
Banks Incorporating Latest Technologies to Stay Ahead of the Curve
By application, the banking sector holds a higher CAGR compared to other sectors and is presumed to grow during the forecast period. The growth is attributed to the burgeoning number of companies adopting advanced technologies to compete with the leading companies. Furthermore, SMEs that require instant loans for initial investment is also one of the factors propelling market growth.
In 2016, the New York bank implemented Newgen’s loan origination software to efficiently manage the growing volume of its commercial and industrial, commercial real estate, and small business administration loan applications. The company, therefore, achieved key benefits that include end-to-end automation with comprehensive reporting application monitoring, increased customer auditing and regulatory compliance, improved First-Time-Right Practice, improved employee productivity, and enhanced customer experience.
Impact of COVID-19
The impact of the coronavirus pandemic has severely affected all industry verticals. The various state and central government have imposed stringent regulations to stop the virus’s spread. This led to the temporary halt of business operations that have majorly hit small and medium-sized enterprises. Thus, to sustain the business growth of business operations, various SMEs and large enterprises adopted the path of lending loans. In 2020, the New Mexico Economic Development Department created the COVID-19 Business Loan Guarantee Program to aid small businesses seeking emergency loans to approximately up to 80% of the principal.
North America Houses a Number of Vendors
North America holds higher CAGR and is expected to grow during the forecast period. The growth is attributed to the presence of a large number of leading vendors offering loan origination software that includes Ellie Mae, Calyx Software, FICS, FISERV, and Byte Software, among others. Furthermore, early technology adoption tendency among North American enterprises to enhance productivity and customer experience is also one of the factors driving the market growth. Moreover, the presence of a slew of SMEs in the U.S., which opts for loans for the initial investment in the business, has also led to the development of the loan origination software market.
Favorable Government Initiatives Drives the Asia-Pacific Market Growth
Asia-Pacific is the fastest-growing market in terms of the adoption rate of loan origination software and is anticipated to grow during the forecast period. The growth is attributed to the extensive incorporation of advanced technology by financial institutions to enhance its productivity in emerging economies such as China, India, and Australia, among others. For instance, in 2018, Cash Suvidha, a leading NBFC in India which offers safe, scheduled and sophisticated business loans to micro, small, medium and large business, adopted Habile Technologies loan origination software to provide unique, tailor-made loan products and gain a competitive edge in the global financial market. Initiatives by the Government of India (GOI) such as “Make in India” led to the development of many SMEs across all industry verticals requiring loans for the initial investment.
The key players in the global loan origination software market have adopted organic as well as inorganic growth strategies that include; partnerships and collaborations, product launch, mergers, and acquisitions to expand its geographical reach. For instance, in 2019, Ellie Mae, the leading cloud-based platform provider for the mortgage finance industry, has acquired Capsilon, the leading provider of AI-powered mortgage automation software for mortgage lenders, investors, and services. In addition to Ellie Moe, other key players include; Calyx Software, FICS, Fiserv, Byte Software, PCLender, LLC, Mortgage Builder Software, Mortgage Cadence (Accenture), Wipro, Tavant Tech, D+H Corp, Lending QB, Black Knight, ISGN Corp, Pegasystems, Juris Technologies, SPARK, Axcess Consulting Group, Turnkey Lender, VSC.
Loan Origination Software Market Segmentation
By Deployment Mode
By Organization Size
The Middle East and Africa (MEA)
Frequently Asked Questions (FAQs)