The pressure is on to make digital lending a reality, but banks cannot digitize their services in a vacuum. They need an overall digital lending strategy. Here are ten steps to a digital lending strategy for any bank looking to stay ahead as borrowers’ preferences advance and the competition rapidly innovates.
1. Know your customers
It is no longer possible to have a one-size-fits-all approach to lending in today’s market. Lenders must segment and target buyers based on their preferences. Luckily, technology today makes it relatively painless to segment customers and engage in advanced personalized marketing. As well, except for the oldest segment, the silent generation aged 73-83, the majority of consumers prefer a digital route to almost the entire loan phase. Lenders who do not segment borrowers and design an end-to-end customer experience that’s appropriate to each segment will fall behind the competition. Here are the statistics at a glance according to PwC’s Experience Radar.
2. Start with a customer strategy
Your customers no longer want to get a home loan the old way. Whether it is researching loan types, applying for loans, submitting, reviewing, or signing documents, or paying up-front costs, nearly all customers want a process that’s speedy and clear. Aligning your customer strategy around a value proposition of ease and transparency will go a long way towards keeping or building your market share.
3. Put money into digital and time into traditional
The majority of customers want a digital experience. According to PwC, this is true across all four asset classes and every phase of the loan application, but that does not mean there isn’t room for traditional interactions. In fact, the best digital lending strategies combine the two, offering digital capabilities wherever certain customer segments prefer self-service and traditional avenues whenever customers feel they need more support. As an example, Hello Home, the app put out by Canadian bank Canadian Imperial Bank of Commerce, guides users through the mortgage process, but also makes chat available with mortgage specialists when requested.
4. Keep things simple
Stick to the features that your customer segments value the most. According to PwC, the top features requested by millennials were loan affordability calculations, interest rate lock-ins, application status checks, and loan comparisons. Digitizing banks should at all costs avoid “feature buffet” and instead stick to the most important factors that people consider when making a loan decision. Of course, at no time should features come at the expense of speed or simplicity. See below for the statistics.
5. Understand the influencers
A mortgage loan is the largest loan almost anybody will ever make and, while there may be one decision maker, there are usually a few influencers. Digitizing banks should not design exclusively around the decision maker; they should also take into account crucial moments when decision makers seek out influencers to inform their process. For this reason, any digital processes banks create should make it easy to share data, showcase positive experiences, and make referrals.
6. Make customer experience your differentiator
Lenders have a reputation for bad customer service – and this is something that digitizing banks can use to their advantage. Using technology to improve customer service can be a key differentiator, not to mention an opportunity to compete on something other than price. Nowadays, new startups and innovating banks have gained significant market share in an unprecedented period with a clear value proposition to customers. Now is the time to create a strategy that enhances the customer experience by speaking to their needs.
7. Identify the gap and determine the top priorities
Where are you now and where do you need to be to stay competitive when it comes to digital lending? What are the weaknesses in your customer experience and journey? Identifying the gap in each customer segment and determining top priorities can be the start of your digital lending strategy moving forward. Do you still rely exclusively on referrals? Does your website suffer from low traffic or conversion rates? Is your customer base aging? Does your mortgage process have too much overhead? The answers to these and other questions will help you fine-tune your digital lending strategy.
8. Survey the marketplace for opportunities
With the recent explosion of fintech, change in the banking industry is accelerating fast, and no product line or segment will remain untouched. Banks need to digitize fast. Luckily, banks have options. They can build out their own solution, buy an existing product, or partner with a fintech company to deliver the goods. Usually, the suite of services banks end up offering will be a mix of in-house, vendor, and partner services, making integration and compatibility a keystone for success. Survey the marketplace for opportunities and make sure to vet any options for short-term compatibility and long-term growth.
9. Identify quick fixes and plan longer-term development
Is it making your website more responsive? Is it surfacing content on your website that’s difficult for visitors to find? Is it developing an app or acquiring a chatbot that streamlines the mortgage application process? A new website may take 6-8 months of development. Are there any quicker wins that can leapfrog your digitization strategy? For example, chatbots can activate dormant websites and automate much of the mortgage application process without lengthy R&D. Similarly, tech tools can help power the referrals that drive so much of the lending industry.
10. Keep your ear to the ground
Fintech is exploding. In CB Insight’s last Global Fintech Report, they theorized that “global fintech investment dollars and deal activity would top new highs in 2017.” This is true for all segments in the fintech industry and it’s up to banks to aggressively take on the responsibility of innovating to keep up. Set aside time each quarter to review the competition and the latest technologies. Whether it is conferences, digital subscriptions, or Google Alerts, create a system that encourages you to transform the latest information into deliverables that can speed up your digitization process. The more innovation-minded you become, the faster your digital lending strategy will accelerate.