As anyone in financial services knows, an influx of new players has flooded the consumer lending marketplace. Some have staying power. Some don't. But all take full advantage of advances in digital technologies to meet and exceed consumer expectations. In the process, they’ve transformed the lending process through the ways they engage their customers.
The battle for customer loyalty isn’t just about digital vs. brick-and-mortar; it’s about customer engagement and delight. Surprisingly, some of the best examples of how to engage consumers searching out loans come from popular retailers.
Lesson 1: Focus on the customer, not the product
A great example of customer engagement comes from Nordstrom, the popular department store brand and online retailer. Nordstrom became a favorite online retailer for through their emphasis on customer experience—both digital and physical. In fact, much of their success hinges on taking the best of online shopping and brick-and-mortar decision-making and applying it across every channel where their customers shop.
For example, consumers no longer have to wait in line to pay at a Nordstrom store. You can also order and pay online, then breeze into a store and pick up your purchase. Similarly, Nordstrom employees are trained in the subtle nuances of putting a customer first; they’re discouraged from pointing and always walk around the counter to hand off a bag.
To combat rising fashion prices and maintain earnings, Nordstrom also focuses on such a personalized shopping experience that consumers won’t mind non-sale prices. The 23 percent increase in quarterly earnings in 2018 proves Nordstrom’s ethos works. Customer loyalty isn’t just about the best offer or deal: It’s about customer engagement.
Lesson 2: Listen to what the data tells you
Data permeates our institutions: loan data, transaction data, credit data—and other types we can incorporate (e.g., social media) to create a comprehensive customer profile. Analyzing it can yield important insight across the customer base and give any institution a competitive edge.
Nordstrom began utilizing big data earlier than most (2015), which helped the organization remain profitable in a decade where many prominent brick-and-mortar department stores fell into bankruptcy. Nordstrom reportedly leveraged data from 100 years of customer purchases to better target Nordstrom Rack customers likely to shop the full-price brand. Nordstrom also uses big data to personalize suggestions and advise how to style clothing. It furthers the shopping experience—and encourages repeat sales.
Ask yourself: What could your institution learn by analyzing data already at your fingertips? For example: What’s the average credit score of customers? The average savings rate? How many have a credit card or loan with a competitor? Below are just a few examples of how institutions can use existing data to further engage customers and refine product recommendations:
- Analytics applied to data can help banks and credit unions further refine underwriting criteria. Rates and rewards can be modeled to find what works best for customers and the financial institution.
- Data can match customers with existing cards to those better suited to their usage needs.
- Leveraged real-time data takes advantage of immediate opportunities when prospects enter the loan marketplace.
For institutions that borrow from Nordstrom’s book, a better understanding of consumers and customers develops into long-term, holistic relationships and not merely a series of one-off transactions.
Lesson 3: Go omnichannel
The mattress retailer Casper encountered a dilemma similar to what many banks face. How do you make something typically obtained in-store (such as a mattress or a bank account) easy to acquire online?
Casper’s winning edge came through selling mattresses as seamlessly as any other online product. The website offers a clean, user-friendly design and laser-focused approach to assisting customers in the mattress selection process. Think: questionnaires, detailed FAQs and a 100-night return policy. Casper then translated this online experience into a similar in-store opportunity. Branding remains consistent from site to store and customer information easily transfers from one channel to the next.
Like retail customers, borrowers increasingly expect digital interaction, which includes receiving and responding to loan offers via multiple channels. Some borrowers still want in-person help, especially with complicated or unfamiliar lending transactions. The takeaway is to not exchange one capability (digital) for another (call center), but expand capabilities across all channels. Brands such as Casper do this to remove the friction for consumers and customers.
In today’s omnichannel banking environment, people expect multiple options to both research and respond to loan offers, and connect with the lender. If consumers respond via smartphone, they expect seamless switching to a different channel—online, in the branch or the call center—and to pick up the application process where they left off without losing their information.
Lesson 4: Build trust with delight
Ever wonder how popular brands reach elusive cult status? Really, it comes down to delighting customers so much that trust builds. For Glossier, a large component of building customer trust came by providing all-inclusive models on their website. This way, women of varying skin colors and shades could visualize products on their skin. This small adjustment made waves in the beauty industry and Glossier built a strong, loyal customer base.
We can see the impact of brand trust within the current lending environment. In the past 10 years, credit-wary consumers have tapped new online sources instead of traditional financial institutions because they feel comfortable in that space. Sites such as Credit Karma and Mint have changed borrower-lender interaction. They offer free online services—such as credit scores, credit monitoring, tax preparation and budgeting—and use data from these tools to market tailored loan offers.
Consumers, especially younger borrowers, may rely on these online services to provide the best loan offers. Thanks to online tools, they understand and trust the value of their financial data and thus feel receptive to customized, pre-approved offers.
Putting it all together: Moving up means sizing up
Despite the rapid growth of online and mobile lending in recent years, many banks and credit unions are just getting started. “It’s not enough to just digitize the application or even digitize the process,” says Youa Yang, digital banking director at Barlow Research. “We have to transform the experience.”
For financial institutions, the road to profitable loan growth starts with a focus on the customer, not the product. Remember: A one-size-fits-all approach to lending doesn’t work in today’s market any more than for Nordstrom shoppers seeking out the perfect shoes.
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Stephenie Williams is senior market strategist for lending solutions at Harland Clarke.