By Joseph Lowe
There’s no shortage of information available on banking best practices. But these articles tend to leave banks wondering exactly what account holders’ expectations are—and what specific processes can be improved to meet them. One clear trend may serve as a guiding light for financial institutions hoping to enact positive change: consumers prefer digital banking channels.
According to a survey conducted by PwC, 46 percent of customers relied on smartphones, tablets and online platforms, skipping in-person interactions at banks altogether in 2017. While no banking customer’s preferences are exactly the same, there are some common threads among borrowers’ experience expectations.
Customers want a digital branch.
For many bank customers, a viable digital branch is a top priority. As technology giants such as Amazon and Google dabble in financial services, customers are increasingly raising their customer service expectations and demanding the same level of service from their banks. Similarly, alternative lenders have significantly increased market share recently due to their emphasis on speed. In fact, alternative lenders’ influence is expected to increase tenfold to $122 billion by 2020 according to The State of Digital Lending, a study conducted by ABA.
There is an urgent desire for digital branches. While large banks have traditionally had a leg up on smaller institutions due to larger budgets and more resources to implement technology, there is still an opportunity for digital adoption among community banks. An emphasis on digital banking means community banks must focus their efforts on building an easy-to-use, online lending experience based on what their customers want.
Customers want a mobile experience.
Today, nearly everyone is connected through their smartphone. Over 75 percent of U.S. adults own a smartphone, and 61 percent of internet users bank online. It goes without saying that having an online presence is a must for banks, but creating a seamless, mobile-optimized online experience can often be left on the back burner.
One commonly held belief is that if a website works on a computer, then it is mobile-friendly—meaning it will work on a smartphone or tablet. While some systems are compatible among different platforms, common issues with download times, crashes and glitches can hinder the mobile banking experience and irritate potential borrowers. This is especially important to consider for millennial consumers, who are most likely to have a smartphone and are 2.5 times more likely to switch banks than other generations.
Mobile phones can be used to streamline the lending process in numerous ways, from lender-borrower communication via email or text message, to accessing the bank’s website or mobile application from a smartphone to check loan approvals or account summaries. Providing an optimized mobile experience offers many benefits to your institution and should be prioritized.
Customers want an end-to-end solution.
The extent of automation involved in digital lending varies from bank to bank. After applying online, it may take days or weeks to render a decision for some financial institutions. Other banks offer automatic pre-approval upon a follow-up call from the lender or visit to the bank. Fewer banks offer complete, end-to-end automation during the borrower lifecycle—just seven percent according to an ABA report.
Imagine you decided to order a hammock online from a vendor. During the ordering process, you chose the hammock type and input your name, address and credit card information. But before the order can be processed you must bring in a paystub to prove you can afford the purchase and a previous electric bill as proof of address to a local store. Would you order from the third-party vendor or just log onto Amazon?
The same logic applies to digital lending.
Borrowers expect convenience, and convenience means an online, end-to-end loan origination system that allows them to apply for a loan, receive a timely decision and accept or negotiate the terms on their own time. Banks that remove as many barriers to the loan decisioning process as possible—without affecting portfolio risk—will win more borrowers.
Customers want security.
Security is an important factor to consider when opening an online branch. A recent study by March Networks states that nearly one in ten people switch financial institutions due to security concerns. The possibility of forged signatures, lost documents and incorrect loan documentation not only lengthens the lending process for the borrower, but it also increases portfolio risk.
While some loans might only involve the collection of documents from a single borrower and cosigner, complex commercial loans, on the other hand, can involve multiple cosigners, business partners, business owners and the original borrowers. These complex loans involve numerous signatures, which can be a time-consuming task to collect and store. Files get lost, documents are signed incorrectly and the back and forth can creative a negative borrower experience. Implementing technology like electronic signatures can offer a secure, reliable method for borrowers to sign documents and save time.
An excess of paper leaves room for error when it comes to document storage too. If your institution stores financial documents in filing cabinets under lock and key, the risk remains that it could be stolen or misplaced. If your institution uses an internal filing system through Microsoft Word or Excel, files can easily become disorganized. In order to offer a secure loan origination system for borrowers and decrease risk, high-performing banks use safe storage systems to manage documentation that is integrated within the loan origination system. A safe, online document storage made for banks can securely collect key documents and centralize financial data for quicker turnaround times during annual renewals as well.
Although no two borrowers are exactly the same, they all have common wants and needs from their financial institutions. And it’s important to recognize those desires and to offer personalized service based on your borrowers’ specific preferences.
Joseph Lowe is the commercial lending marketing manager at Sageworks, a financial information company.