Today’s lenders should ensure that credit is only provided or extended to borrowers who can genuinely afford it. This can only be achieved by truly understanding customers, and technology is transforming the way that businesses do this:
- Market insight is being used to develop a clear strategy that works both for the lender and the consumer.
- Comprehensive affordability assessments are increasing the amount of customer data available to lenders.
- New lending models are being implemented to better fit with consumers’ affordability
If lenders can address these challenges in the coming years, not only will they improve lending outcomes for borrowers, they will bolster the sustainability and growth of the business.
Market insight: unlocking the power of data to benefit the needs of the consumer
Market insight can be an invaluable tool for benchmarking lenders against their peer group, giving an understanding of which products are successful. It can also paint a detailed picture of consumers’ borrowing behaviour, including what isn’t working and what can be changed to better suit them. What’s more, the consumer understanding generated can also further help mitigate risk and determine strategy.
The benefit of market insight is obvious for both lender and customer alike. The lender is able to generate increased revenue and enhance their business’ productivity. The consumer will enjoy an enhanced customer experience delivered by a lender that can put their needs first and deliver a tailored offering.
Comprehensive affordability assessments: understanding customers’ ability to repay
To find out how lenders are making use of customer data and assess their changing attitudes to affordability, TransUnion UK (formerly Callcredit) recently interviewed 100 risk professionals and 100 customer experience managers in the UK. The results highlight that lenders increasingly see themselves as having a wide responsibility when it comes to lending and understanding a consumer’s ability to repay. 72% of those we surveyed believe it is their duty to prevent customers from over-stretching themselves financially.
To meet these expectations, affordability assessments are required to help lenders understand a customer’s current level of risk and how this is likely to change over time. Utilising advanced affordability solutions such as our Affordability Suite, lenders can now quickly and easily verify whether a credit applicant can afford further borrowing. Lenders are able to assess more potential borrowers with an automated application processes that provides detail on an applicant’s financial history in a digital format.
New lending models: shifting from short-term to long-term
Following changes in regulation, there has been a change in the alternative lending space. The sector’s emphasis has shifted from mainly providing short-term loans to focus on long-term lending options that fit with a consumer’s affordability. As result, the lines that traditionally divided the lending industry are becoming increasingly blurred, generating more competition.
It is clear that the lending landscape is continuing to evolve at a rapid pace. Lenders shouldn’t try to resist these developments, but instead keep up by capitalising on the technology solutions that can help keep their business agile. Market insight and affordability assessments that use the latest technology can help lenders promote responsible lending and develop the kind of personalised solutions that will deliver the best outcomes for their customers.