Digital Lending Growth: Is Simple Online User Experience the Key to Retaining and Acquiring Loans?

Today’s show Digital Lending Growth is brought to you by One Touch Video Banking

Dan Daggett is a 30-year Credit Union Executive, and founder and President of Daggett Enterprises USA, a Financial Services Agency. Dan is a collaborative intrapreneur whose passion for innovation has resulted in new business lines, new revenue sources, and engaged teams for nearly three decades.

Foster Kelly is Direct of Business Development at Rate Reset. Before that, he was a top producer at Churchill Mortgage. His passion for digital lending has fueled part of the innovation with Rate Reset’s most powerful solution. Rate Reset is a leader in digital lending with products that help credit unions and banks retain their loans with patented Reset technology.

Today we’re going to be talking about a hot topic digital lending growth. It has been on the forefront of bank and credit union executives’ minds, even before the pandemic. But now since the pandemic, it’s top of mind and a top priority. With our guest today, we’ll not only talk about how to acquire new customers but also how do you retain and increase wallet share with existing customers?

Dan, you’ve been a credit union executive for a long time, seen a lot of changes from the digital lending side in auto and mortgage, what do you think has been the biggest change from the consumer side, in the last 24 months or even 12 months with the pandemic?

Dan states, the rise of so many online transactions that we do it daily. And when I’m talking about online, I’m not just talking about, in front of the PC, it’s on our phones. Things such as digital banking at home, depositing a check, all have become so commonplace. It’s just been a natural outgrowth from our day-to-day activity. Also, things such as video chatting in this past year, all of our zoom meetings it’s here to stay and has just continued. The expectation has carried over, tremendously on the lending side. It doesn’t matter whether I’m going into my Amazon account and make a purchase. There’s an opportunity offered to spread those payments out over time.

Another important thing is being consistent in our offerings to every consumer that we’re trying to transact with. I think the demand is going to be there and we’re just going to continue to have to meet those needs of the consumer in the place that they want to be.

 What are the biggest struggles banks and credit unions are having with online applications and digital lending growth?

Foster explains to stay competitive you have to keep your finger on the pulse. In digital lending growth, if you are not a year or two ahead of what’s already out there, then you’re obsolete. What struggles is he seeing with banks and credit unions right now:

  • Trying to connect legacy systems with newer technology platforms.
  • Trying to compete with neo and digital banks can be daunting.
  • Inefficiencies on their website such as showing prospects that an online application is going to take 10-15 minutes. With so many things out there where you can click a few buttons and be done, it’s going to be hard to get prospective customers to complete these applications.

Are human touchpoints costing narrowing your digital lending margins?

Smaller community banks and credit unions allow you to start an online application but then when you are finished it directs you that for the account to be set up, you must comp into a physical branch to show your driver’s license and documentation. We live in a world where with a couple of clicks of a button, you can get groceries, dinner, or pretty much buy anything online.

Foster explains a lot of bank executives need to be educated on what’s out there right now and how it’s all seamlessly connected depending on what platform you have available to you. It’s not good enough anymore to have people having to drive to a physical location to complete the online application process. One of the neat things I thought about with One Touch Video banking technology for digital lending growth was not only the face-to-face connection but you can snapshot the ID, and not make the consumer go in person. And that synthetic verification process is actually in my mind, more secure than somebody coming into a branch or even taking a picture of their driver’s license to emailing it to the branch.

 Are the number of “clicks” a contributor to lower conversion rates?

Anyone that studies the optimal user experience knows that the number of clients does matter. Rate Reset is doing some interesting things with alternative data, for existing customers to not have to go through this same lengthy application as a new customer. How does alternative data play a factor in speeding up the application process and increasing conversion rates?

Cutting edge banks have an immense amount of data, to begin with leveraging that data internally and using it from an alternative decision standpoint is very powerful. When it comes down to that alternative data is validating who individuals are. With just a few keystrokes, I can sign in to some software and I can find out who’s Carrie’s mother was married to 30 years ago and who they were related to. I mean, the validation of data that’s, there is just unbelievable. And he goes through all those customer identification programs where it comes up and says, what was the color of your first car?

 Which demographic needs video financial guidance the most in digital lending or banking?

Millennials and Gen Z’s are the largest demographics that are going through “financial firsts” which makes them higher to want and need financial advice. Solutions such as video chat and video banking have become so popular to increase conversion rate and application throughput.

Dan speaks about where he is from in Maine, most credit union customers leave for 6 months and head to warmer states. This makes it difficult for these customers and forces them to bank with several banks, video banking would solve this.

 Digital Servicing Needs Just As Much Focus as Digital Lending Growth

Most banks focus on digitally acquiring customers but forget that customers who want to digitally open an account, want to digitally be onboarded and serviced digitally too. The failure to look at both sides can result in a low retention rate.

Digital-first customers, like Carrie, hate when bankers call saying, “can I stop by your office?”, can you come by the branch or can I take you to lunch?”. The time and effort to meet in-person with a bank is a two-hour-plus round trip, consumer and business clients just don’t have that time anymore.

Banks and credit unions spend a lot of time in the digital acquisition bucket, but they have to take it. a step further if you are going to digitally retain and service customers.

Millennials now account for 70% of the buying power demographic and Gen Z is in the 24-year-old banking demographic too now. Baby Boomers aren’t coming into the branch as much as people think, because they’re more set on their financial advice.

If You Aren’t Implementing Now, You ARE 2 Years Behind

Foster and Dan weigh in on their thoughts. They’ve got to look at it. If they’re looking at these technologies, now they’re getting left way behind. Dans says when he started in this industry in 1993, there were about 145 credit unions in the state of Maine. And I think we’re under 50 at this point, with consolidation. And I think that consolidation is just going to increase on a more rapid basis because these smaller institutions, I’m talking $500 million and under, they need to get on the bandwagon now. The cost of entry is not as burdensome as some of them might think. When you think about that lost opportunity costs the way they prioritize things, they need to start looking at these things now. Just watching the technology over this past year, sitting in this office, during the pandemic I’ve gotten to participate in a lot of different, demonstrations of different technologies that are out there. And, you know, there are some significant players in the market that if you’re not on board with them, your competition is, and your member’s going to go there. The customer’s going to go there.

 Smaller Institutions Have a Big Advantage, NOW with Technology Cost-Effective

Consumers go to smaller banks and credit unions for local relationships and personalization. However, they’ve always lacked technology, now with it considerably less expensive they have the bigger opportunity to implement faster than the megabanks. For the people that want a closer relationship, megabanks don’t offer it but they have better technology historically. While megabanks can afford better technologies like video banking, it would take them 18 months to implement it across so many locations and bankers. Smaller banks and credit unions can implement new Fintech technologies in less than thirty days.

 What Two Things Should Be on the Roadmap for 2021 for Digital Lending Growth?

  1. Some institutions will spend upwards of a thousand to $1,500 to acquire a new loan. They put that load on the books and they may serve it in terms of collecting payments, but they don’t do a good job in real onboarding that consumer. They have, they know everything about them for all intents and purposes but they don’t take that next step to, sell the next product, or retain that loan on the books.
  2. Strategy- regardless of new digital or experience officer roles, you can’t just buy new technology and shelf it or never implement it. You have to have your ducks in a row for any successful technology implementation.
  3. Culture Change- banks we’re built on physical brick and mortar models. A culture change has to come top-down for new technologies, people, and processes to be successful.

To learn more about Rate Reset and Daggett Enterprises.

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