Loan origination software automates the end-to-end loan portfolio cycle, simplifying and improving both the application and approval of loans. Loan origination solutions offer a holistic view of borrower transactions across all channels and products within a single platform.
By centrally managing loan products, loan origination software reduces regulatory compliance risk. In addition, loan origination tools offer insight into each transaction through real-time business activity monitoring, as well as content and resource optimization through audit trails. Some loan origination tools include underwriting and rating software functionality and credit analysis. Loan origination software is often implemented through the cloud, and these solutions typically contain loan servicing software functionality or integrate with those solutions to provide a comprehensive loan management solution.
Growing demand from BFSI sector, advent of new companies in BFSI and IT sector and technology advancements are the factors propelling the market growth. However, the surge in cyber attack and breaches hinder the loan origination software market growth.
The global loan origination software market is presumed to grow at a CAGR 14.7% during the forecast period.
Growing Demand from BFSI Sector
The BFSI sector is increasingly adopting loan origination software to increase productivity and enhance the customer experience. It is leaning toward advanced automation technologies, such as artificial intelligence, to understand consumer behavior better. AI-based loan origination software helps banks and financial institutions recognize customer choices based on their transaction history and prevailing trends, thereby improving customer engagement and building trust.
High demand for loan origination software in the banking sector for retail or customer lending, commercial, small and medium business lending, mortgage lending, and others to add flexibility and adaptability for future needs is expected to drive the market in the coming years. Credifranco, a U.S.-based Non-Banking Financial Company (NBFC), implemented Habile Technologies’ loan origination software solution in 2018 to cater to the increasing customer demand and allow users to extend loan and cancellations.
The global loan origination software market has been categorized into component, deployment mode, organization size and application.
Based on deployment mode, the global loan origination software market has been bifurcated into cloud and on-premise.
The on-premise segment for software deployment held the largest market share in 2018. On-premise software can be installed directly on users’ computers or servers, which enables them to retain the design data on their systems. Highly regulated industrial verticals, such as BFSI, are likely to adopt on-premise solutions.
Despite the high implementation of on-premise solutions, demand has observed a slight decline due to the pandemic. The segment is still expected to exhibit the highest CAGR in the upcoming years as on-premise deployment is estimated to be more profitable than cloud-based deployment for companies due to reduced complexity and complete control of systems. Increased security concerns associated with cloud-based software are anticipated to fuel on-premise software deployments.
Based on component, global loan origination software market has been bifurcated into solution and services.
Solution segment is anticipated to cater the dominant market share in Global Loan Origination Software market. The current spread of Corona virus pandemic has jeopardize the economic structure and the disruption in the supply chain has caused great hindrance to the economic and financial welfare of most of the financial institutions and organizations. At this time there is a certain need of software solutions and services to overcome the difficulties and to have proper support to streamline the workflow and also to increase the cash liquidity. Mortgage loan solutions could increase the cash flow and increase the state of liquidity in the market. So, over the first half of the forecast period the market has an optimistic opportunities to garner significant traction in the market.
In 2018, Credifranco, a US based NBFC has implemented Habile Technologies loan origination software solution to overcome the challenges including; allowing user to extend the loan and cancel extension with necessary authorization and ability to cater to the growing volume and demand among others. In the light of implementation, the company now able to track collection of loans and enhance customer experience by providing employee all necessary information of a customer in a single window.
On the basis of organization size, the global loan origination software market has been segmented into SMEs and Large Enterprise.
SMEs hold a significant share of approx. 85%-90% in the current business environment. To date, SMEs have proved to be the backbone of developing and emerging markets, specifically for the Association of Southeast Asia Nations (ASEAN), contributing about 35–40% to their gross domestic product (GDP). However, economically developed regions, such as Europe and North America, are also recording a surge in the operations of SMEs. As per straits analysis, an approx. of 24 million SMEs operate in Europe, representing about 96–98% of total organization. Similarly, North America accounts for an approx. of 94–95% of SME operations when compared with large enterprises.
Based on application, the global loan origination software market has been categorized into, banks, credit union, mortgage lenders, Insurance and others.
Banking sector holds the higher CAGR comparable to other sectors and is presumed to grow during the forecast period. The growth is attributed to increase in new companies and IT sector that adopt advanced technologies to compete with the leading companies. Furthermore, increase in SMEs that require instant loans for initial investment is also one of the factors propelling the market growth. As loan origination software provides the staff to manage the tasks on time, underwriting and documentation thereby eliminate the delaying of processing time. This enables banking sector to adopt loan origination software to gain customers attraction.
In 2016, New York bank has 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. In the light of adoption, the company has achieved key benefits that includes; 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 novel 2019 coronavirus has led to the temporary halt of business operations around the world. Therefore, SMEs, along with some large enterprises, have adopted the path of lending loans to sustain business operations. Consumer lending institutions are playing a vital role in response to the coronavirus outbreak. As economic hardship is intensifying, market players are exploring opportunities by introducing new developments through organic growth and diversification.
Financial institutions are under immense pressure due to regulatory frameworks. Many are likely to introduce business continuity plans to address the fast-moving and unknown variables of the pandemic. Loan originators are expected to help customers who work in hospitality and other service industries with mortgages, auto loans, commercial loans, and credit cards to secure customers’ future and build employee relationships.
Advanced technologies, such as AI, blockchain, and machine learning, incorporated in loan origination and monitoring software, are expected to steer companies and financial institutions toward their short-term and long-term goals.
North America holds the higher CAGR and is expected to grow during the forecast period. The growth is attributed to presence of 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 among North American enterprises to enhance productivity and customers experience is also one of the factors propelling the market growth.
Moreover, presence of large number of SMEs in U.S. which opts for loans for initial investment in the business also led to the development of loan origination software market. For instance, according to U.S. Small Business of Advocacy (SBA), 2017, U.S. accounts private sector accounts for approximately 30.2 million SMEs. This enables financial services institution to adopt loan origination software to manage the loan application of both SMEs and large enterprises.
Asia-Pacific is the fastest growing region in the adoption of loan origination software. The growth is attributed to growing adoption 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 has adopted Habile Technologies loan origination software to offer unique, tailor-made loan products and gain a competitive edge in the global financial market.
Furthermore, increasing government initiatives also led the financial institutions to adopt process automation to manage the growing customer’s engagement. For instance, Government of India (GOI) initiatives “Make in India” led to the development of many SMEs across all industry vertical which require loans for initial investment, thereby paving the way for growth in adoption of loan origination software.
The key players in 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 servicers. 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
- Training Services
- Consulting and Implementation
- Support Services
By Deployment Mode
By Organization Size
- Credit union,
- Mortgage lenders,
- The U.K.
- The Rest of Europe
The Middle East and Africa (MEA)
- Saudi Arabia
- South Africa
- The Rest of MEA
- South Korea
- The Rest of Asia-Pacific
- The Rest of South America
Frequently Asked Questions (FAQs)
North America is expected to hold the highest market share in Loan Origination Software Market.
BSFI Sector Segment is expected to be the leading segment in Loan Origination Software Market during the forecast period.
In 2019 Global Loan Origination Software Market was valued at USD 3.7 billion.
Calyx Software, FICS, Fiserv, Byte Software, PCLender, LLC, Mortgage Builder Software, Mortgage Cadence, Wipro, Tavant Tech, D+H Corp, Lending QB, Black Knight, ISGN Corp, Pegasystems are the top players in Loan Origination Software Market.
The global loan origination software market is presumed to grow at a CAGR 14.7% during the forecast period.
Enhancing productivity and customer experience, rise adoption of innovative technologies are the key factors expected to drive Loan Origination Software Market during the forecast period.
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