As we’ve seen, there has been an influx of new players to the consumer lending marketplace. Some have staying power. Some don’t. But all are taking full advantage of advances in digital technologies to meet consumer expectations. These days it’s all about user experience, the interaction of technology, and the consumer. Investment in online is good; investment in mobile is even better.
Borrowers increasingly expect to interact digitally, and that includes receiving and responding to loan offers via multiple channels. Some borrowers still want to interact with a real person, especially in the case of complicated or unfamiliar lending transactions. The takeaway here is not to exchange one capability (digital) for another (call center), but to expand capabilities across all channels to provide a seamless and frictionless experience for consumers and account holders.
Changing Consumer Expectations
In the past 10 years, credit-wary consumers have turned to new online sources instead of traditional financial institutions because they are comfortable interacting in that space. Sites like Credit Karma and Mint have changed how borrowers interact with lenders. They offer education and free online services, such as credit scores, credit monitoring, tax preparation and budgeting, and use the data from these tools to market tailored offers from lenders. Along with anonymity, “freemium” education is a big driver for consumers today.
Consumers, especially younger borrowers, may rely on these online services to provide the best loan offers because — thanks to their online tools — they understand the value of their financial data and in return are receptive to tailored, preapproved offers.
According to research, 47 percent of consumers would be comfortable applying for a primary mortgage online. In fact, most want to complete the entire process online, from researching to signing documents, a trend that continues to move toward more online interaction. One survey found that a majority of consumers prefer to apply for any type of loan online, especially younger borrowers, although some segments still prefer human interaction for some parts of the process. It’s not just availability of tech driving this behavior, it’s also the amount of time involved applying online and uncertainty in the approval process. With options available at your fingertips, who wants to take time to go to the bank, or risk face-to-face rejection?
In today’s omnichannel banking environment, account holders and prospects expect multiple options for researching loan offers, responding to offers, and connecting with the lender. If consumers respond to an offer via a smartphone, for example, they expect to switch to a different channel — online, in the branch, or the call center — and pick up the application process where they left off without losing their information.
And while more financial institutions are migrating to cross-channel or even omnichannel marketing strategies, according to research too much focus remains in the online channel, when most traffic is in the mobile channel.
Why Mobile, Why Now
As smartphones and other mobile devices have become more widespread, more consumers than ever are online constantly: 26 percent of American adults. For younger adults, the percentage is even higher: 39 percent. Of adults with mobile connectivity, 89 percent go online daily and 31 percent are online almost constantly.
Consumers want the ability to lock in rates, compare products and calculate affordability of payments — all from their mobile device. The most important mobile feature that consumers cite: the ability to calculate the loan amount they can afford.
Beyond the engagement and loyalty benefits, there are also cost reasons to accelerate development of digital channels for loan marketing processes: each mobile interaction incurs a variable cost that’s a tiny fraction of the cost for a teller or call-agent interaction.
Other industries feature frictionless online marketing, purchasing, and customer service options. Online lenders adopting those traits have further raised the customer experience bar: while in the past it might have taken four days to process a loan, with today’s technology it can be done in four minutes. Consumers say overwhelmingly that the most important factor in a loan decision other than relationships and product features (rate and terms) is the speed of the process.
The bottom line: a transformed consumer lending process driven by fintech developments doesn’t have to be a threat to financial institutions. Instead, it can help them better serve their account holders, reduce costs and improve profitability, both by emulation and collaboration.
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