Every lender has been there. 

You either approved a “bad” loan or failed to give a loan to a customer who turned out to be a great prospect for future business.

Although the number of nonperforming loans is relatively low these days at 1.6%, lending pitfalls are not just related to non-payment or late payments.

Today’s consumer evaluates companies based on speed, service, and convenience. A gaffe in the lending process can wind up hurting your brand and business for years to come.

What Constitutes a Pitfall?

The most obvious answer is that an institution makes a loan to a consumer who can’t ultimately pay the loan back or consistently pays late. However, a pitfall can also be one of these common situations:

• Your institution delivers less-than-stellar customer service, which results in delays, distrust, annoyance, and potentially a long-term negative impression of your brand. Consumers now have access to online lender rankings and reviews. They share their experiences, both good and bad, with millions of other people.
• The information you give your prospects is incorrect. A whopping 67% of consumers say that they got wrong or inconsistent information from bank customer service agents. 

• You bury your prospects in paperwork. As the number of millennial borrowers increases, consumer expectation will shift hard to digital transactions. Comparing lenders is now as easy as a few keystrokes on a laptop, tablet, or a phone. Lenders who create a seamless digital experience throughout all steps of the process will tap into this huge new market.

• Your view of good credit risks is outdated. Although the law prohibits discrimination in lending, humans still allow their biases to impact their treatment of customers. What’s more, artificial intelligence may not really fix the problem, but instead make it worse. Credit checks and lending decisions are now made more complex by the way people are working today too. For example, gig workers and independent contractors are expected to comprise 53% of the workforce by 2023. That means that many borrowers will not have traditional paychecks as a basis for income. Lending institutions will have to look closely at how they gather proof of earnings when making lending decisions.

The new borrower will be radically different from those of years past, and your financial institution will need to look at every aspect of their operation, including your website, marketing program, lending criteria, and more.

Before You Make One or More of Those Mistakes…

Take a long, hard, and honest look at your 2021 (and even 2020) portfolio and process. Be sure to also review your competitors and how they’re currently doing business.

Dig deep into the “good” and “bad” loans you’ve made over the past few years. What did you do that worked? What are some patterns and common mistakes? Were there loans that looked perfect on the surface but turned out to be problematic? 

As important as the deals you made are the deals you lost. When a customer went with another institution, what drove them to that choice?

Invest in meaningful research. Persona research will give you insights into the types of consumers you should be targeting and the marketing messages that will appeal to them. Customer service surveys will reveal areas where you need to improve process and training. 

Take online reviews and rankings very seriously. Tomorrow’s consumer will be comparing your institution to others and a few negative service experiences can live on for a long time online.

Speaking of online, every successful lending institution is taking its web presence and process very seriously these days. After all, that’s where consumers are now starting their search for lenders. If finding information on your website takes too long, a prospect will simply click off to another place. 

If your process is paper-intensive and slow, tomorrow’s borrower might be willing to pay a higher rate just for convenience and speed.

Above all, look at all the touchpoints in customer interaction, both real world and online. Does your staff have the information and training they need to provide customers with accurate and timely information? Do people get caught in endless holds when they call into your institution? See the world through the customer’s eyes and “mystery shop” your own process to make sure you remain competitive in today’s fast-paced lending world.

Check your biases at the door. Review your algorithms in depth to ensure that hidden biases are eliminated. And make diversity and inclusion hiring and training a key part of your 2022 plans. 

Investments in Technology are Imperative

The right technology solutions can ensure that every consumer gets accurate information, fast decisions, and convenience throughout the process.

If you’re a smaller institution, you may not think you have the resources to upgrade your systems. But that’s simply not true. You can deliver a highly personalized experience to every consumer without spending millions on new technology. 

Banks, credit unions, and non-bank lenders have discovered a platform that enables every institution to deliver a fast, seamless, and customized experience to prospective borrowers. You eliminate paperwork and save thousands of hours and dollars while streamlining the customer experience.

ATTUNE may not eliminate ALL the pitfalls, but it can certainly reduce them dramatically. Schedule a demo to learn more.