During COVID-19, accelerated digital transformation — shaped by evolving regulations, the need for accurate, more detailed insights, and innovative customer-facing platforms — has afforded lenders the opportunity to strengthen customer relationships.
A by-product of the ‘new normal’ has been increased consumer expectations around the lending experience. Consumers have benefited from proactive communications, richer, increasingly personalised digital experiences and new flexibility for payments on certain financial products. The lending industry should celebrate the positive response to the economic challenges presented by COVID-19. Looking ahead, however, consumers are likely to want lenders to continue to match or exceed these new expectations, and it’s important for FS providers to consider how they can do this while encouraging loyalty.
The pandemic has improved financial literacy
During the past 12 months, consumers’ financial behaviours and attitudes have changed, with many gaining a deeper understanding of their credit profile thanks to customer experience (CX)-friendly digital experiences.
Since April 2020, we’ve tracked consumer actions and perspectives on credit scores. As of March 2021, there’s been a significant decrease (-13%) in individuals who don’t monitor their score and significant uplifts in those who monitor it regularly (daily +7%, weekly +11% changes). In addition, the importance consumers place on credit monitoring has shifted dramatically, with significantly more appreciating the role it can play in future financial decisions.
The idea consumers have become more financially attuned is born out by further industry research that found 6 million UK consumers downloaded their bank’s app for the first time during the initial COVID-19 (2020) lockdown.
It’s clear consumers want holistic, easy-to-understand financial interfaces and information that’s available with a swipe of a finger. Indeed, these experiences are continuously evolving to incorporate different aspects of an individual’s financial footprint, such as timely reminders for upcoming payments, segmented spend analysis visualised using simplified dashboards, and alerts to potential fraud risks like compromised account details. Banks and credit information providers, supported by solutions as such as CreditView, have a unique opportunity to offer these platforms and create something consumers love and value.
Open banking is unlocking more efficient customer journeys
"In allowing customers to securely share data that previously might have required hard copies being mailed in the post or multiple files being downloaded and shared via email, it’s a clear win for that key CX metric; convenience."
Being able to offer customers a secure way to apply for financial products that involves minimal effort and helps them access affordable products is a tangible CX win. With solutions such as open banking, trended credit data or TruValidate, the effective optimisation of digital onboarding will come into its own as the new economy evolves
Stephen Wishart, Director of FinTech for TransUnion in the UK, is impressed by the acceleration in and potential of open banking: “If you look at open banking’s adoption in the UK market as a whole, over 2.5 million UK consumers and businesses use open banking-enabled products to manage their finances, access credit and make payments. And API call volumes moved on from 66.8 million in 2018 to nearly 6 billion in 2020.
“It’s an option increasingly offered and — if we use increased usage as a proxy — expected by customers. In allowing customers to securely share data that previously might have required hard copies being mailed in the post or multiple files being downloaded and shared via email, it’s a clear win for that key CX metric; convenience. But it’s also providing rich, granular data insights, which at this moment in time, are invaluable to lenders. Open banking can clearly add real value to creditworthiness strategies.”
In terms of the customer journey for those within your portfolio you’ve identified as vulnerable and needing support, open banking could also be used to get a granular view of finances. Using it further into the customer journey, a range of businesses, such as lenders or utility companies, could use it on a one-time permission basis to assess detailed information so they can sensitively work with customers to develop a payment plan.
Consumers and lenders have embraced new ways of working together
Through payment freezes, such as those on mortgage payments, lenders have demonstrated they can adapt innovatively to changes driven by the macro environment, regulations and customer needs.
It was reported in April 2020, one in nine UK homeowners had taken a mortgage holiday, and there can be no denying this flexibility was appreciated and needed by consumers as household finances came under pressure. It remains to be seen whether this flexibility is a moment in time — that may have created artificial customer expectations around their relationships with lenders — or whether some lenders will bake this flexibility into the makeup of certain credit products in the ‘new normal’.
Three ways digital lenders can address emerging customer expectations to drive growth
With competition fierce for customer acquisition, lenders need to think strategically to build an aspirational proposition that matches customer expectations. To quote entrepreneur and author Seth Godin: “Don’t find customers for your products, find products for your customers.”
- Invest in great customer management: Monitoring what’s happening to existing customer portfolios can help build trust and strengthen customer relationships. By identifying challenges consumers may be facing, using tools like advanced algorithms, unique overlays or alerts, and having the processes and solutions in place for proactive communications, lenders can reduce risks, cultivate loyalty and support approaches to compliance.
- Build on those two-way conversations: The pandemic has driven two-way conversations between lenders and customers, opening up new ways of thinking about customer relationships and how loyalty can be fostered. For lenders, a priority is likely to be developing tools that bring relevant and meaningful financial data to life for their customers. These aspects of apps or platforms will need to work hard to empower, inform and delight customers in equal measure. Likewise, the uncertainty around the macroeconomic environment should make lenders, utility companies and retailers consider platforms and solutions that enable them to have fair, constructive conversations with customers. This thinking should be embedded within customer management processes, including delinquency and collections strategies.
- Be a CX leader: “Investment in CX can be seen as a space race as businesses seek to offer a superior experience that helps them both grow and protect market share,” Wishart explains. “Ultimately, it’s about creating sticky digital experiences that are built on intuitiveness, trust and offering choice. To support growth efforts, FinTechs will need to more deeply explore how their data solutions and customer strategies overlap at key touchpoints, and look for new opportunities.”
Digital native lenders will be focusing on opportunities to gain a competitive edge and key priorities are likely to include:
- Building trust and securing the digital ecosystems with fraud solutions that help better detect and prevent fraud — but don’t compromise a streamlined approach to onboarding or customer login.
- Investing in solutions that accelerate the customer journey and reduce the amount of time a customer spends on an action. A mixture of solutions can help solve this challenge: fraud solutions that enable friction-right experiences; open banking portals that reduce the amount of time, clicks and effort during an application for a financial product; and trended credit data that enables fast, accurate and robust decisions during creditworthiness checks.
Bolster your analytics team and data insights
The unprecedented nature of the pandemic means businesses must be agile and work in new ways. Evolving your approach and deploying new solutions — especially in a remote environment — places pressure on resources and expertise.
To adapt digital ecosystems so they meet the demands of different consumer groups, we’ve reworked roadmaps and supported teams to optimise approaches and deliver the benefits our solutions aim to offer. We’re helping lenders with hands-on expertise through analysis, consultancy work, and interactive sessions where we share ideas, discuss trends and walk through market challenges. Talk to us to about how we can help your business in the new digital economy.