The User Experience in Lending – Where should it be?
Speed and trust are vital for unsecured lenders; these being attributes that our research highlighted as the greatest influences when a consumer selects a lender. But what about the customer journey over the full life-cycle of their loan?
User experience hasn’t always been at the forefront of lenders’ minds, but given the rapid technological advances, new market entrants and strength given to peer recommendations; it has accelerated up the priority list. Application forms, physical proofs of ID, copies of bank statements, wet signatures and BACS transfer of funds are all still alive and kicking, though at the other end of the spectrum, forward looking lenders have embraced the digital age and make it quicker and easier to go from application to funds in a matter of minutes rather than days, whilst still ensuring that a fully compliant process has been followed. Traditionally, lending has been a single transaction relationship, but as consumer behaviour changes, it’s essential that lenders develop offerings that both attract and, more importantly retain, good customers. In this article we look at each stage of the lending life-cycle to highlight areas where borrowers’ experience can be enhanced.
APPLICATION – So, imagine that you’ve gone through the process of creating a product you think meets the needs of target customers you’ve embarked on a marketing campaign to draw in borrowers and now it’s time to take them through the application. It’s possible to reduce the application and pay out process to below 15 minutes and provide a superlative experience for the applicant, though unfortunately, primarily for the most creditworthy of individuals. What about those with a slight blemish on their credit file or, more commonly, those with very thin files. One way or another, you’ve spent money to get them to apply, how can you maximise your acceptance rate without compromising on your risk appetite?
We’ve talked before about the emergence of new scoring techniques that use non-traditional data whether that be social media information or access to bank account data. These provide the lender with a tremendous opportunity to capture a large proportion of demographic and financial data in seconds, meaning that the data entry element of an application becomes less onerous for the applicant, but the lender has more valuable insight to inform their decision making.. Some lenders are even deploying video chat in order to complete more complex loans, or perhaps to close referred borderline applications. The point is, that depending on your target applicant, there is a raft of new technology that can materially improve your performance whilst enhancing the customer experience.
SERVICING – New customer successfully boarded, job done! They’ll pay what they owe and in a couple of years you’ll have all your money back plus interest and you’ll not need to engage with that borrower again …. Right?!?
The challenge here in lending at least, is less about day-to- day management of an account but all about being there when needed. Borrowers’ growing demands are for services to be convenient and always available. Certainly borrowers are increasingly tech savvy and are bombarded with other service options from other, predominately non-financial providers, and increasingly have an expectation to service online. The need for an agent should be reserved for exceptions only and Nostrum’s efforts have been focused on this strategy i.e. providing elegant tools to allow borrowers to service their agreements at a time and through a channel that suits them. Proactive engagement with a borrower should be based upon real insight. This is a difficult task unless you have invested in the relationship when any offer of a new, enhanced or additional product will be a shot in the dark.
COLLECTIONS – The borrower has missed a payment, it’s time for action. Whilst collections might be one of the more challenging sides of lending, it’s not only essential, it can be a positive customer engagement if handled correctly. Of course, some borrowers simply can’t or won’t pay and they require a different level of servicing, but for those that have short-term financial issues, there are options. Collections strategies have evolved way beyond ‘three contact attempts and a letter’ to a better fit around the lives of customers ensuring that they are dealt with fairly and as individuals. Automation and self-service has also made collections a 24/7 activity, allowing borrowers to make arrangements to best suit their financial capabilities without the need for what they may feel is an embarrassing cross-examination from a contact centre agent. Predictive analytics can also play a part; if a customer is habitually late paying, sending a payment reminder in advance of Direct Debit can prompt a positive response that allows the borrower to avoid late fees and saves the lender the collections effort. The experience the borrower has in this instance can reflect positively in an age of social media, where a mishandled approach can lead to a negative comment that’s indelibly attached to the lender.
FINAL PAYMENT – “It has been a pleasure knowing you, let us know if we can help in the future”. Typically a loan is taken to tackle a one-off large expense like a car or home improvement, but is it possible to build a relationship and offer further advances? As a customer progresses with their loan, even those that pay on time and never make contact, they are generating data and building trust with the lender. At this stage the lender will have unique data including who the person is (after the scoring and screening at application) and how well they transact (payment history or arrears resolution) which means they can simply offer a new product for either further funds or reduced interest rates. But this doesn’t always translate to good customer experience as it’s a one-time speculative offer that isn’t based upon an action or express desire. Fast forward to the not too distant future when the Internet of Things (IoT) begins to grow and beacon technology is common place in retailers; gaining access to this data can provide the trigger for a targeted offer. This is where a positive customer experience can give the lender the edge.
IS THERE A CUSTOMER EXPERIENCE UTOPIA? – With the promise of PSD2 offering a more open architecture and access to customer account data, we could see the adoption of dashboard account management or personal financial management becoming a reality for the masses. A product that draws data from any number of sources, for example current accounts, credit cards, savings, investments, store cards or loans, providing a single view of a customer’s financial exposure could win the FinTech battle for customer ownership. The challenge here will be trust; mass adoption would require a company with a strong brand and industrial security to ever hope for a customer to give up access to all aspects of their financial life. There doesn’t seem to be a brand that has emerged as being up for the challenge yet., but perhaps an individually licensed software, which is configured and managed by the customer, could overcome some of the issues; a little like an enhanced wallet that pulls all financial products into a single dashboard.
By Richard Carter, Chief Executive of Nostrum Group
This article was first published on The Fintech Times.