New research from Jim Marous shows that the move to digital channels is continuing as competition for loan customers increases.
One of the main reasons for the move to digital lending is that financial organizations are responding to consumers' desires to complete the entire loan application process without leaving their preferred digital channels, according to Jim Marous, recognized as one of the most influential people in banking and a top five global influencer.
Consequently, as Marous points out, financial institutions are allowing customers to apply for loans online and via their mobile devices to meet consumer need for speed and simplicity.
Marous, owner and publisher of the Digital Banking Report and co-publisher of The Financial Brand, was the presenter of the recent webinar, "The Future of Digital Lending Survey Results," hosted by MeridianLink.
During the webinar, Marous shared key insights based on survey results regarding the current and future uses of digital lending.
Availability of Online, Mobile Loan Applications Increasing
Ninety-one percent of the more than 300 financial organizations surveyed say they're making their loan applications available online this year, up from 85% in 2020. And more than 50% are offering mobile loan applications, up from 44% in 2020 and 34% in 2019.
However, banks and credit unions aren't just enabling consumers to apply for loans via their mobile devices, they're also trying to make those applications as mobile-friendly as possible, Marous said.
Forty-five percent say their online application processes can be completed in less than five minutes (compared to 15% in 2020). And 50% of institutions say their mobile application processes can also be completed in less than five minutes (compared to 20% in 2020).
Simplicity and Speed Are Key
To compete with fintech firms more legacy financial institutions are revamping back-office processes to improve the customer experience in the loan application process.
Consumers expect easy engagement and speed of process that can only be achieved if financial institutions build digital capabilities from the inside out, Marous said in the "2021 Digital Banking Report," sponsored by MeridianLink.
Every component of digital lending improved in 2021, with the greatest improvement in functionality in areas that impacted simplicity and speed. As such, banks and credit unions recognize that they need a comprehensive solution to deliver lending products that cost less, reduce risk, and shorten loan cycle times.
The primary consumer benefits of a digital lending solution are simplicity and speed; however, digital channels will fail to rise to consumer expectations without an efficient and digitally enabled back office.
Deploying a formal onboarding process to welcome new customers applying for loans and better engage with them is also an important part of improving the customer experience, according to Marous.
Cost and Complexity Are Primary Onboarding Challenges
Financial institutions have realized that new customer relationships require personalization and nurturing to optimize value and loyalty. And it's more important than ever to deepen engagement through onboarding and building value with cross-selling.
The problem is that many banks and credit unions build digital versions of their core account opening processes from the perspectives of bankers, not consumers. To succeed, financial institutions need to design these digital processes according to their customers' needs and what's easy for them, Marous said in the webinar. Financial institutions must focus on convenience and efficiency in account opening and onboarding experiences.
An increasing number of organizations also understand that optimizing the loan customer experience requires more than a "thank you," he said. To that end, 57% of financial institutions say that they have loan customer onboarding processes, compared to only 45% in 2020.
However, the number of organizations stating that they're building an onboarding program in the next year dropped from 30% in 2020 to 16% this year. When asked what stands in the way of primary onboarding, the financial institutions cite cost, complexity and to a degree staffing, Marous said in the webinar.
Financial institutions are realizing the way to stay ahead of the game is through partnerships. Collaboration with outside providers is the gateway to innovation and improved functionality, Marous said.
Third-party providers can help banks and credit unions reduce the complexity of the onboarding process because they've already worked with other financial institutions to build effective onboarding programs.
5 Keys to Digital Lending and Account Opening Success
In the webinar, Marous offered the five keys to digital lending and account opening success:
- Digital is not optional. Providing digital loan application and account opening functionality is table stakes in an increasingly digital world.
- Don't fake digital. Digital loan applications and new account openings must be fast, easy, and adaptable across channels.
- Promote digital. Digital lending and account opening are differentiators. Promote internally and externally to gain buy-in.
- Build from within. Digital transformation begins with rebuilding underlying processes for digital delivery. It is not moving from paper to PDFs.
- Follow the leaders. Consumers are comparing your organization to big tech, retail, travel, and entertainment players who understand digital engagement.
You can view the recorded webinar here. MeridianLink also sponsored the 2021 The Future of Digital Lending Report (a $495 value), which is also available to download free of charge when viewing the webinar. With the report, you will gain access to in-depth results that complement the information presented in the webinar.