Forward-looking banks and credit unions are searching for a balance between technology’s convenience and the know-how provided by human employees.
As fintech upstarts continue to encroach on banking relationships and Big Tech redefines customer expectations, companies in all industries are reimagining the consumer experience. This is especially true in financial services. Digital delivery of financial services—whether opening an account, applying for a loan or carrying out another account transaction— has become table stakes. Now, the industry’s focus turns toward optimizing those platforms.
On a recent trip, I was thinking about this focus on digital experience—and how the aims of airlines relate to those of banks and credit unions. Think about the digital enhancements that the airlines have introduced to our flying experience. We can book or change flights, change seats and check the status of a flight on our phones. We no longer need to print boarding passes or search for a gate agent.
But alongside these tech-driven positives exists a lengthy list of negatives: airplane seats seem to shrink each year, delays are more commonplace and we all shudder at the thought of waiting for checked luggage to arrive at baggage claim. In other words, our digital experience with the airlines is undeniably better, but the journey may be worsening.
The purpose of travel is typically not the flight itself— it’s the destination. Similarly, the aim of a loan applicant s not to complete the application, but rather to buy that new car they’re seeking to finance, or begin the kitchen renovations that will be funded by a line of credit. For many consumers caught between the bumpy economic recovery from the pandemic and rising prices, access to loans can have even higher stakes.
Wise organizations recognize the distinction between the consumer digital experience and the consumer journey. Increasingly, that journey begins on a laptop, tablet or mobile device, so the accessibility, look and feel, and ease of use of the digital front end is important. But it’s not paramount. Slick data capture on a new account application website is nice. Nicer still is a personalized application experience with pre-populated data sourced from the existing relationship with the financial institution. A text message
the next day with notification of a loan approval is also nice. But none of this is as beneficial as an instantaneous, personalized loan decision and next steps delivered in one sitting.
According to recently published survey results, financial institutions seem to recognize this distinction when directing investment dollars. “Customer experience as a top innovation driver is losing some steam, as many organizations see the value in other types of innovation drivers, including internally focused initiatives,” the report notes. “This indicates that institutions are recognizing that infrastructure investments need to be made in order to support consumer-facing systems.”
The foundation of the consumer digital loan or account application experience may be a banking institution’s website or mobile app, but the foundation of the consumer journey is the systems, people and processes behind the scenes. So, it’s a good idea to start with that foundation when optimizing the consumer journey.
Identify the areas of friction in those processes—the need to access multiple systems, the extra clicks a user needs to perform, manual decision points or handoffs between people or teams. In almost all cases, it’s these inefficiencies that delay the consumer’s journey to the ultimate desired destination, whether it’s getting funds into a new account or receiving a loan to buy that new car.
Of course, a major difference between the airline experience and the digital lending experience is that banks and credit unions assume risk in lending money to the consumer. Fast decisions are critical to the application experience, but accurate decisions are critical to the institution’s balance sheet.
The risks are growing, too. Consumers generally take out auto loans either for higher-priced new vehicles or for riskier used-vehicle collateral. According to recent data from the National Credit Union Association, used-auto loans rose 13.4% year over year to $272.9 billion in the first quarter of 2022, and new-auto loans rose 3.6% to $145 billion. Unsecured personal loans, a lifeline for many consumers, offer relief from overloaded, high-interest credit cards. These loans are being sought by subprime applicants and those lacking robust credit histories upon which traditional underwriting benchmarks have been established.
Transferring loan decisions from experienced human underwriters to automated systems is a risk for the financial institution. But the speed and personalization required to meet consumer expectations, as well as the sophistication required to mitigate credit risk, demand data-centric automated loan risk assessment, pricing and decisioning.
Most institutions recognize this reality, and they’re searching for a balance between speed and technology and the knowledge and empathy that can only come from a live employee. Many have systems that can perform sophisticated evaluation of all available data about applicants, credit data and collateral. Some have begun using models based on artificial intelligence and machine learning. In all cases, financial institutions focus on process for continuous optimization of credit policy and agility in implementing changes to meet market demands.
Efficiently leveraging data and integration across systems, streamlining and automating workflow and decisioning, and replacing manual and paper-based processes and tasks will empower a bank or credit union to optimize the journey. It will get consumers to their destination faster and more efficiently, and that’s the key to having satisfied account holders who will come back for more services and influence others to try their bank or credit union.