After years of sustained practicality, consumers are borrowing again at a record pace: whether for home improvements, buying new homes and autos, or financing their children’s college education.
What drives the rosier outlook? Consumers generally feel positive about their financial situations—with consumer confidence reaching new highs in 2018. Strong job growth and improved business conditions are also fueling consumer spending.
As consumer expectations and spending increase, so does borrowing. Credit inquiries increased by three million, to 176 million, in just six months. Total household indebtedness reached $11.85 trillion, a 2 percent increase over the prior quarter.
Consumer borrowing is revving up, thanks to automotive
Since the Great Recession, consumers have found increasing confidence in taking on more overall debt. Auto loans and leases produced record-setting volume. Revolving consumer lines of credit are inching towards $1 trillion.
Besides increased economic confidence, consumers are more trustful of non-traditional channels (such as digital) to purchase products and loans. Disruptors contribute to increased lending competition and propel community banks to show resourcefulness as they identify, target and acquire creditworthy consumers.
The critical call to make borrowing easier
As technology improves and access to data increases, so customer expectations rise for superior, friction-free service. Community banks already know the importance of customer centricity. Trends for 2018 show that 61 percent of organizations rank it a top-three priority, compared to 54 percent last year. The trend around data use and application also increased in importance from last year; 57 percent place it as a top-three priority, compared to 53 percent for 2017.
Why a holistic marketing approach makes sense
To generate sustainable loan growth today, community banks must rethink communication with potential borrowers. Today’s consumer is more informed than ever and has more lending options. With the speed and convenience of digital—and consumers in the driver’s seat when choosing their lenders—modern-day financial markets must look beyond conventional, seasonal push-marketing tactics. Instead they need to embrace strategies that engage prospects and members as they achieve lending goals. Banks can start by redefining a “potential borrower” as anyone who pre-qualifies for a loan, credit card or other product—regardless of whether they’re interested in borrowing—and engage them in immediate, relevant ways.
That’s why a holistic loan marketing strategy actively reacts to individuals shopping for loans and proactively creates interest among those who are not. This makes sense in today’s wide-open economic climate: An “always on” approach allows banks to reach consumers in all their decision-making stages—thus increasing the likelihood of acquisition and sustained loan growth.
For example, your active response to a credit inquiry helps you to stay engaged with current and potential new members. An offer made while a consumer researches a product or service boasts far more relevance and saliency than one made outside the shopping window. Execute well on event-triggered marketing and you can expect your message to receive five times the response rate of non-targeted push messages. Extending an offer while consumers research proves highly cost effective. Selling to an existing account holder represents one-tenth the cost of acquiring a new one.
Fact: Companies that execute well on event-triggered marketing can receive five times the response rate of non-targeted push messages.
Conversely, proactive placement of multi-product, recurring prescreened loan offers—placed at the fingertips of pre-qualified candidates—can instantly transform non-shoppers into borrowers. It delivers the ultimate friction-free consumer experience and increases the financial institution’s loan volume. That reduces loan acquisition costs and streamlines the loan processes. Give consumers easy access to multiple, pre-selected products and your response rates, as well as total loan portfolio, will skyrocket.
A three-part, holistic loan marketing success strategy
1. Set up an alerts program where multiple credit bureaus alert you whenever credit inquiries are submitted for your members. Using all three credit bureaus is best, as it will provide 75 percent more coverage. Sixty percent of all loan shoppers will commit to a loan within a week of a credit bureau inquiry. Monitor these inquiries and counter with a quick, pre-approved offer via the channel to which shoppers will most likely respond: whether mail, email or phone. It will help you stay one step ahead of the competition and win market share.
2. Adopt a turnkey program that sends multiple loan offers for home equity, auto, credit card, personal and other loans through multiple channels—online, direct mail, mobile, email, branch and phone—to members and prospects who meet specific underwriting criteria to access anytime, anywhere.
3. Create seamless, convenient experiences. Put loan offers at consumers’ fingertips to accept anytime, anywhere. Quickly send offers via direct mail, email and phone while consumers shop for loans. You will create quality customer experiences that can strengthen account holder loyalty, reduce attrition and extend your brand.
In a perfect world, your members would never even think to inquire about a loan from a competing institution—and you’d brandish the resources to get in front of every prospect. But economic and technological times have changed. Multiple channels offer myriad borrowing options.
But you can compete for your share of consumer loans by implementing this three-part strategy of reactive alerts, proactive engagement and quality customer experiences. For in the marketplace of consumer lending, the bank that wins is the one that lends itself a hand.
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Stephenie Williams is the executive director, lending solutions, at Harland Clarke.
If you enjoyed this article, check out our recent Executive Report: Community Banking: Tackling challenges in changing times.