In September 2021, CRIF Highmark, one of India's premier credit bureaus, published a report titled “How India Lends-FY 2021”, and it charted the growth of the Indian lending industry over the past decade.

While the report covered ground across several aspects, one of the primary highlights was the almost 100% growth experienced by the industry in FY 2020-21 in comparison to FY 2017-2018.

As per the report, the current portfolio of the Indian lending industry stands at ₹156.9 lakh crore, and while this is great news for both stakeholders and consumers, the report highlighted the various gaps the industry is yet to bridge.

For instance, although over the past 5 years, many new as well as marquee lenders have digitized their lending value chains to meet the customer at their convenience, one common pain point that still remains is the struggle of choosing an Loan Origination System (LOS) partner who can assist lenders in not only servicing their customers better but also streamline their entire lending supply chain, such that both profit and accountability can be increased.

As a lender, if you too are struggling to find a trusted LOS partner, this article is for you as we will be discussing the key aspects you need to look out for before onboarding a technology partner and also some snippets from our own experience in being a trusted LOS partner to some of the most prominent lenders in India.

Without further ado, let’s get started.


Table of Contents

  1. What Is Loan Origination System (LOS)?
  2. How to Choose the Right Loan Origination System (LOS) Partner?
  3. In Conclusion

What Is Loan Origination System (LOS)?

One of the first and most important aspects we need to understand is the exact meaning of the term LOS.

In simple terms, LOS is the industry acronym for Loan Origination Software, which can be understood as a suite of software solutions which enable you to efficiently manage and streamline the entire lending value chain, right from pre-qualification and loan origination all the way to credit assessment and hand over to the Loan Management System.

Traditionally, lenders have depended on legacy systems and manual processes to service customer offerings, which have not only contributed to unnecessarily long and complicated application processes but also a demotion in customer satisfaction.

Loan Origination System
Stages of Loan Origination Process

However, over the past decade, loan origination systems developed by technology companies such as Finflux have helped not only veteran lenders digitize their entire lending value chains by migrating offline processes to the cloud and automating manual tasks, but also helped several neo-lenders enter and successfully service the market.

Thus, in one statement, a LOS can be understood as a software solution which helps you, the lender, automate the entire lending value chain, right from customer onboarding to handover, and decrease your turnaround time while increasing your productivity and profitability in the process.

How to Choose the Right Loan Origination System (LOS) Partner?

Now that you understand the meaning of a LOS, the obvious question which must be pondering your mind is, "how can I choose the right LOS partner for my business needs?"

While at first glance, the answer to this question might appear to be simple, in reality, there are a multitude of factors you need to consider in order to execute an informed decision on the right LOS partner for your business. The reason behind this being, although all lending infrastructures might appear to be the same, in reality, similarly to other businesses, every lending business is structurally different, thus making your needs unique.

Keeping this in mind, shared below are some of the most prominent aspects you should inspect in order to successfully onboard a trusted LOS partner for your business needs.

  1. Experience & Reputation

One of the first and most crucial aspects you should take into consideration is the experience of your technology partner in their space. Apart from being a technology forward company, ensure that your LOS partner’s SAAS offerings speak for themselves.

One of the key highlights which should be on your radar is that your LOS partner should always offer innovative and forward thinking solutions, such that you are always well equipped to stay ahead of the crowd and can always offer your customers top of the line lending experiences.

Along with experience, another factor which you should closely monitor is the reputation of your technology partner in their industry. Unlike few other aspects of your business, where you have the leverage of juggling between vendors, your core offerings should ideally be powered by a trusted and reputed partner, such that you can rely on them for smooth functionality and not have to change vendors often.

2. Innovation

A key driving force behind all of the technological advancements the lending industry has made across the past decade is innovation, and since a majority of the Indian lending industry is now digitized, innovation amongst your technology partners plays a major role in ensuring that you always stay ahead of the competition.

When choosing a LOS partner for your lending business, ensure that you inspect their business vintage as it will equip you with a yardstick to accurately visualize the innovation the company has brought forward since their inception.

Choosing a LOS partner who offers advanced features and arrives with a promise of constant innovation will not only ensure that you can always service your customer with the best lending experience but also consistently stay ahead of your competitors.

3. Scalability

If there is one factor which was highlighted the most in CRIF’s "How India Lends-FY 2021" report, it was how the lending industry has scaled in the past decade, and this goes on to display the immense impact scalability has on your success story as a lender.

Loan Origination System
Source : Value of digital lending market in India from 2012 to 2018, with forecasts until 2023 by Statista

Similar to other industries, when you are choosing a LOS partner for your lending business, it is important that you keep scalability at the forefront of your decision-making process.

The reason behind this is simple; today, the lending industry in India is worth 200 billion USD, and by 2023 it will be worth more than 350 billion USD, and thus if your LOS partner does not offer scalability, you will either be incapacitated to capitalize on this growth or be severely left behind by your competitors.

Thus, when you are choosing a LOS partner, ensure that their SAS offering is built to service millions of customers and not just thousands.

4. Customizability

As I shared at the beginning of this article, although your lending business might appear similar to your peers, in reality your needs vary and thus one of the key aspects you should inspect in order to onboard a trusted LOS partner is customizability.

Although it is true, that out of the box solutions are often more affordable from a business point of view, in this day and age, where customers crave end to end customizations, having a technology partner who can offer you a customized LOS to meet your exact needs, is truly a blessing.

One of the key advantages of having customizability as a feature is the fact, that not only will you be able to offer more borrower friendly lending solutions, but it will also enable you to stay ahead of the curve and retain your borrowers for longer.  

5. Customer Service

Last but not least is stellar customer service. If you have ever used a business software solution in the past, I am sure you are well versed in the fact that customer service plays a major role in your success story, especially when you run into an issue.

Not only will a LOS partner with good customer service ensure that you have peace of mind during your operations, but also ensure that your team can perform their tasks at utmost productivity without needing to go back and forth to troubleshoot errors in the software module.

In Conclusion

As the lending industry continues to grow in India, this is an opportunity for your lending business to capitalize on one of the biggest lending markets globally and also financially support the dreams of millions of borrowers.

While there are multiple components which will ensure your success in this industry, one of the primary will be your choice in a trusted LOS partner.

Now that you know how to choose a trusted Loan Origination Software for your needs, think and choose wisely.

All the best.

Thank you for reading, and I will see you in the next one.


The Reference Shelf

  1. The Importance of Choosing a Trusted LOS Partner [Link]
  2. Indian lending market grew 100% from FY17 to FY21, reveals CRIF’s How India Lends – Credit Landscape in India FY 2021 report [Link]
  3. Value of digital lending market in India from 2012 to 2018, with forecasts until 2023 [Link]