Making Sense of Industry Buzz: 4 Trends for Smarter Consumer Lending
Alternative lenders are encroaching on the space traditional financial institutions have called home for centuries: consumer lending.
Irrefutably, new technology adoption and digitization are growing at unprecedented speeds, with online lending becoming increasingly popular. Yet, more borrowers continue to rely on established relationships with their banks and credit unions over digital-only lenders. According to Finder, 60% of consumers with personal loans borrowed from a bank, 30% from credit unions and 24% from online lenders, proving consumers still trust their traditional financial institutions more than newer market entrants.
Long-term consequences of the global health crisis remain uncertain. Looking closely at recent trends, we can understand where traditional institutions stand with borrowers, and how they can stay equipped to best address lending demands. Digital tools, for example, simplify the loan application, approval and funding process through online and mobile channels.
- Digitization stimulates loan growth.
PWC's June study found 27% of consumers are more likely to use their institution's website, and 23% said the same for the mobile app. Notably, 24% stated they're less likely to visit the branch to apply for a loan. This shouldn't come as a surprise with the majority still banking remotely.
But what does this mean for banks and credit unions? Restrictions posed by regular branch hours, and lending programs incapable of onboarding from a device of choice limit lending opportunities. As a result, frustrated borrowers turn to online lenders with the promise of easy accessibility and 24/7 availability.
- Mobile-first isn't "new." It's a must.
A realigned focus on mobile channels for consumer lending is crucial. BAI states, "Because many consumers use their mobile phone as their primary device for accessing the Internet, one area that many banks and alternative lenders are re-prioritizing is the mobile channel."
Delivering a simple and frictionless user experience (UX) requires banks and credit unions to modernize and automate lending workflows through the mobile app, simplifying loan origination and approval processes. Prioritizing a mobile-responsive design ensures your bank or credit union delivers more than just 'an app on the phone.'
Mobile-first lending capabilities are equally important for lenders and borrowers. Loan officers, underwriters, and other team members require the same effortless, anytime accessibility for loan approvals and funding.
- Auto-decisioning: less steps, more approvals.
Callahan & Associates found 30.38% of consumer loans are auto-decisioned. "Even if a bank gets the timing right, it still needs to ensure a simple and seamless customer experience that's fast and intuitive," stated Alexis Krivkovich of McKinsey. How can FIs balance fast, intuitive, simple and seamless capabilities all at once?
The answer is smart automation, paired with customized business rules to meet your specific institutional needs. Intelligent auto-decisioning equips underwriters and loan officers with powerfully accurate decision-making tools, saving valuable time for more strategic, meaningful interactions. Automation fosters increased control and flexibility on the lending side, allowing staff to focus on building relationships, while reducing manual-labor and promoting consistency.
- A user-first approach, young or old.
Tech-savvy borrowers of all ages frequent the lending landscape, as seen in survey findings from February, where Finder reported 48% of Baby Boomers took out a personal loan. This demographic was followed closely by 47% of Gen Xers and 47% of millennials. And while Boomers took out the largest loans, the average loan size for Gen Z borrowers was just over half of the amount that Boomers borrowed. Enabling digital capabilities provide users of all ages with a simple and personalized lending UX, keeping banks and credit unions at the forefront despite changing demands.
A channel-agnostic approach allows current and potential borrowers to engage with their institution at their discretion, increasing loyalty and trust levels. Digital marketing, mobile and web apps facilitate cross-selling opportunities, empowering FIs with actionable business intelligence, strengthening risk management and promoting sound decision-making.
Make industry buzz your reality.
With digital capabilities, responsive designs, and a user-first approach, traditional financial institutions sharpen their competitive edge, retaining borrowers and warding off the threat of digital-only lenders.
FinanceGenius, a cloud-based, mobile-first loan origination solution (LOS) delivers 24/7 access to borrowers and lenders, enabling strategic automation paired with customized business rules for a solution that meets your market needs. An integrated reporting console provides a centralized view into document and version control, facilitating quicker application funding, and rendering ultimate convenience to keep pace in an increasingly competitive digital world.