Over the past 15 months, there has been a lot of talk about the “Amazon Effect,” especially as it relates to retail. Consumers have flocked to online channels to make purchases for everything from clothing and home goods to groceries and cars. Yet less attention has been paid to how this trend — a trend that started before March 2020 but that has certainly accelerated due to the pandemic — is impacting financial institutions.
The fact is simple: consumers want what they want and they want it now. What does that mean for lending? Nothing good for unprepared financial institutions.
Lending has traditionally been a long and arduous (and expensive) process for banks and credit unions. From requiring scanned and/or downloadable documents to poor mobile experiences that drag users through long and tedious forms, financial institutions are a bit behind the times. Plus, it’s costing them money.
Are You Giving Customers What They Want?
If you’re wondering if you’re one of these financial institutions, consider evaluating your performance across these three areas.
Member Experience
The 2020 Digital Banking Report points out that 85% of financial institutions let consumers apply for a loan online but only 44% make it possible to apply from a mobile device. Given the radical shift toward digital channels we’ve experienced over the past year, it begs the question: are you meeting your customers where they are at to provide the best member experience possible?
When evaluating your current member experience, there are a few factors to consider. The first is your demographic mix and how each segment prefers to experience banking. Younger consumers have fully embraced mobile, so forcing this group to upload documents to open a loan is just bad business. They crave the instant gratification they get from platforms like Amazon and they’re looking for a similar experience when borrowing from their financial institution.
Even older demographics are leaning into tech as the world undergoes this digital evolution. While some may be more inclined to bank in-branch, the past year has taught us nothing if not that certain situations require the ability to bank remotely. The key for this segment is to ensure that your systems and processes are intuitive enough to help them adapt without abandoning them.
Adaptability
The quickest way to evaluate your institution on adaptability is to take a look at how you performed with PPP loans. Was that process smooth and frictionless for your customers? Did you meet your goals or were you unable to participate in PPP loans? If you missed this mark, you should be asking why. For most, the answer will lie in an inability to adapt when consumer needs shift drastically.
According to Salesforce’s State of the Connected Customer 2020 report, the pandemic did much to expose gaps in technology and the customer experience. Notably, 68% of customers say the pandemic elevated their expectations of digital capabilities.
Institutions that rose to the challenge were able to quickly adapt and take advantage of an opportunity that came about without any warning. Most likely, they were operating on configurable systems flexible enough to adapt as needed with minimal disruption to staff and operations.
Scalability
The final point of evaluation is scalability. This one is simple: is your membership rising? The population is growing yet there are fewer credit unions. If you’re not preparing for growth, you’re going to run into some overwhelming pain points. Consider the following questions:
- Are you meeting your members where they are at (online, mobile, in-branch)?
- Are you able to offer members what they need, when they need it?
- Are you taking advantage of opportunities to cross-sell?
Credit unions and banks can take a page from the Amazon playbook here by looking at the way they serve customers. Amazon’s “suggested products” functionality makes it incredibly easy for people to find things they didn’t even realize they needed — and to get them with the click of a button. Why then can’t banks utilize similar consumer data to offer personalized loan products when someone opens an account?
The Amazon Effect for Lenders
Many financial institutions are caught between the need to remove limitations but configuring new systems is also expensive, right? Not necessarily. The key is to have systems and processes in place that can predict consumer behavior. Armed with that data, they can understand what consumers want and need — and be positioned to offer that in real-time.
Meeting Members Where They Are
To best serve your customers, understanding customers starts with mapping their digital footprints. Insights into where people abandon applications or run into other hiccups allow you to address obstacles and find opportunities to improve the loan application experience.
Customers want a responsive, fast and frictionless experience. With the right data, financial institutions can remove stumbling blocks for customers. That can include unnecessary burdensome extra pages/ steps in loan applications and confusing navigation or language. The Salesforce survey shows only 27% of customers feel the financial services industry is customer-centric and only 23% think the industry handled the pandemic well. This suggests that financial institutions that invest in improving customer experience are well-positioned to profit.
Preparing to Pivot
Banks and credit unions must always be ready for what’s next. With the right data, you can become a highly adaptive pivoting machine that can seamlessly meet evolving customer preferences.
All signs point to digital as the path forward for financial institutions. Adaptability rests on your ability to support the digital lending process with tools and technology that streamline the application experience. Application portals that can prepopulate fields, include scan-to-field data entry, and promote mobile accessibility, remove friction. And that makes it easy for customers to apply anywhere and at any time. It may seem basic, but empowering people in this way becomes really important in times of uncertainty.
Aiming for Growth
Financial institutions that want to improve scalability need to focus on personalization, which requires data and operational consolidation. Disparate systems across channels and multiple vendor relationships can make it difficult to understand the customer journey and predict what customers need and want. What’s more, it’s expensive and hinders the customer experience.
Financial institutions should not only focus on improving loan times but on customizing the entire experience. That means enabling loan applications across in-branch and online channels and providing instant decisions. As fintechs and challenger banks flood the market, speed, ease-of-use, and personalized offers will be critical to competing while optimizing the customer experience — both of which are required to scale and increase share-of-wallet.
Stepping Into the New Lending Normal
Amazon’s consumer operation model has changed the consumer buying experience in ways that financial institutions would be wise to note. Loan offerings in this new context should adapt in three important ways: 1) being available everywhere, 2) being fast, and 3) being uncomplicated.
Are you ready to step into the new normal for lending? Learn more about how your financial institution can adapt to evolving customer needs and preferences by downloading our newest eBook, “The New Now.”
