Few aspects of modern business have gone untouched by the digital transformation of the last decade. For banks and credit unions, technology has rapidly transformed how they communicate with customers. Younger tech-savvy consumers have grown up comfortable interacting in a myriad of ways with financial institutions. With more data and analytics available than ever, lenders can tailor their approach to become more efficient and results-focused in their interactions. Below, we discuss how lenders' and borrowers’ communication strategies have changed to help drive better results and stronger relationships.
Customer Expectations Have Changed
These days, fewer people are visiting branches and interacting with lenders in person. The pandemic had accelerated electronic loan decisions and closings, which were already becoming popular before Covid-19 struck.
These industry changes have led customers to expect instantaneous and easily accessible services. Millennials and Gen Z’s favor loan applications and bank services that are always-on. They want quick decisions made outside regular banking hours from the convenience of their smartphone or similar device.
With that said, we know that community banks and credit unions are the backbones of communities across the country, and even the youngest generations know their local bankers, who are vital to small businesses and residents in small communities and neighborhoods across the US.
Engaging Customers Electronically
While many customers still favor face-to-face communication when possible, the circumstances of the 2020 pandemic have forced financial institutions to offer a blend of physical and digital methods. Consumers respond well to the instantaneous nature of push notifications, in-app messaging, SMS, and email.
The lending/banking market has never been more competitive, and with consumers expecting quicker decisions and more account benefits, lenders need to be agile to capitalize on these digital opportunities. Delivering competitive checking products and continually assessing engagement will help you retain your customers and members while increasing profitability.
Employ a Variety of Communication Methods
While you can’t get it right every time, there are clear communication preferences among different consumer demographics. Using the consumer data they already collect allows financial institutions to tailor a dynamic approach that targets a demographic’s most likely preferred communication method. Giving the consumer their choice of a preferred method of contact saves staff time and energy and makes sure your engagements with customers come in the form they find convenient, strengthening their view of your institution.
Automatic Loan Status Updates
While consumers expect immediate responses to loan applications, there is growing evidence that the speed and ease of use of digital financial services are expected even in areas like mortgage lending. Automatic Loan Status Updates are an excellent way to keep your consumers informed about where their application is and any potential roadblocks along the way.
Unfortunately, research shows that many borrowers feel their loan company doesn’t communicate sufficiently during their application. To solve this issue and reduce the number of inquiries during what can be a lengthy process, regular clear and relevant messaging to borrowers keeps them informed and helps with trust. Additionally, by communicating with borrowers through their preferred method, you can expect quick responses to the next steps, and therefore more promptly completed loans.
Avoid Insurance Communication that Causes Negative Interactions
Another point of friction is the noise created by communication from lenders and servicers about insurance premiums after the loan is closed. Many lenders still use the outdated method of tracking and force-placing to mitigate risk when it appears that a borrower does not have the required coverage on the respective collateral. Unfortunately, this method comes with its own set of inherent problems, including negative press from CPI complaints/lawsuits and public reviews (Yelp, BBB, Google reviews), increased charge offs due to higher payments, higher loan balances requiring loan loss reserves to be higher, and leaving a bad taste in your customers’ mouth, especially when force-placed in error.
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For these and other reasons, blanket protection products have become more prevalent in the lending industry. Our innovative Blanket 360 insurance program eliminates all of the above issues while completely covering a financial institution's entire portfolio. Blanket VSI covers your consumer portfolio, Blanket Mortgage covers your mortgage portfolios, and Blanket Equipment covers your difficult-to-track equipment loans. Download our guide to Blanket Insurance to learn more, or contact us today!
Sources:
https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth
