Whether you’re a financial institution or a business looking to integrate loan products into your offerings, it’s clear that today’s improved technologies have significantly streamlined the development of loan products. But even with plug-and-play platforms and API integrations, successfully launching a loan product still requires careful planning, testing, and analysis. In this blog, we break down the details of these processes, all the big questions you need to ask when developing and launching loan products, and the solutions you can leverage for a smoother journey.
Why Develop a Loan Product?
Developing a new loan product serves several purposes. Firstly, it allows businesses to stay competitive by expanding their range of offerings, catering to the evolving needs of their customer base. Additionally, creating innovative loan products provides customers with improved access to credit, addressing specific challenges such as qualifying for loans or seeking more convenient payment options. The key motivation is to identify genuine needs within the market and offer flexible loan solutions that can be easily adjusted to meet the diverse requirements of the target audience.
What to Ask Before Launching a New Loan Product?
Developing new loan products helps you better meet evolving client demands, fuel growth and boost competitive edge but there are several questions an organization to ask themselves before embarking on such an endeavor. Before launching a new loan product, consider asking the following questions:
- Market Need: Is there a clear demand or need for the proposed loan product in the market? Have you identified specific pain points or challenges that the new product will address?
- Target Audience: Who is the target audience for the new loan product? Have you conducted thorough research to understand the preferences and requirements of this audience?
- Competitive Landscape: How does the new product differ from existing offerings in the market? Have you assessed the competition and positioned your product uniquely?
- Regulatory Compliance: Are you aware of and compliant with all relevant regulations and legal requirements? Have you considered potential regulatory challenges that may arise?
- Risk Management: What are the potential risks associated with the new loan product? Have you established risk mitigation strategies to address these potential challenges?
- Technology and Infrastructure: Is your existing technology and infrastructure capable of supporting the launch of the new product? Have you considered any necessary upgrades or modifications?
- Testing and Feedback: Have you conducted thorough testing of the new loan product, including pilot programs if feasible? What feedback have you received from potential users, and how have you incorporated it into the product development?
- Flexibility and Adaptability: Is the new loan product flexible enough to adapt to changing market conditions? Have you built in mechanisms for updates and improvements based on user feedback?
- Long-Term Viability: Have you assessed the long-term viability and sustainability of the new loan product? What are the growth projections and potential scalability challenges?
To Build or Buy Your Loan Product?
When planning your product launch, a crucial decision is whether to develop in-house or use a Platform as a Service. With plug-and-play capabilities from APIs, it’s not an all-or-nothing choice. Many companies choose to outsource some services and handle others internally with their own engineering teams.
To determine whethere to build or buy, consider the following questions:
- Consider your existing capabilities: Established companies with development teams may build many features in-house, gaining more control over the experience and avoiding monthly subscription costs.
- Time to market: Determine your speed to market and the importance of customization in your customer experience. These factors often go hand in hand, and using a solution is likely to expedite your market entry.
- Evaluate your budget: Cost plays a significant role in choosing a platform partner, especially for crucial services like payment processing and core systems. Explore different prices while keeping in mind integrations, features, compatibility, and user experience.
Product Building Pro Tips
Build for Growth: When scaling, plan to bring crucial capabilities in-house and reduce reliance on tech vendors. Choose a flexible, cloud-based platform that promotes agility through integratable architecture.
Monitor & Control: Lending exposes you to fraud and credit losses. Be ready for fraudsters and credit-hungry customers as a newcomer. Understanding portfolio risk may take time, depending on your product structure. Monitor early risk indicators like delinquencies to grasp portfolio health. Use a comprehensive monitoring system to proactively update credit policies for stability.
Explore and Innovate: Integrate and develop financial products quickly without moving the earth to do so. This allows fast real-world testing and descision and fosters a culture of growth and innovation.
Consider a Partner for Lending Solutions
To enhance the creation of a new loan product and adjust loan configurations for any financial offering your lending business provides, explore the benefits of automation. Utilizing a tailored loan management software solution enables improved service for existing customers and expands your capacity to attract new ones, all with reduced time and cost. With Tarya Fintech, the process of launching any new loan product is transformed. Schedule a demo today to discover more!