Originations: Keep up, or get left behind
I recently visited a high-end car dealership as a mystery shopper to assess their loan application process. I soon discovered it involved several layers of manual processing and verification and would likely take several days to complete – I was also told I’d have to return during the week to start the application process, as head office would need to manually assess the paper-based application.
Not only would this have taken days of my time, but there was no indication as to whether I was even in with a shot of getting the loan, instead it would just be a ‘wait and see’ situation. Even the most steadfast of consumers would be considering other options at this point. According to the 2019 Royal Commission Report, 51% of consumers looking to purchase a vehicle, have already chosen a lender prior to attending a dealership. So, unless dealerships have the ability to provide on the spot decisions, it is highly unlikely that they will win that customer’s business.
Consumer expectations are changing. Credit providers can no longer afford a longwinded originations process that leaves customers waiting for a loan decision they know can be made quickly. These expectations are being transferred from the subscription economy - think AfterPay, Spotify, Netflix. Their subscription processes are completed with a few taps of a button and approval decisions are made quickly, often within seconds. Some consumers now expect the banking and finance industries to offer the same level of swift service.
The instantaneous nature of many consumer services has set a new standard across industries. Paired with Australia’s move towards Open Banking - where consumers will be armed with more options and have greater control of their financial data – credit providers need to transform their processes to achieve competitive advantage.
A need for speed, without jeopardising risk
A credit provider’s customer journey – be it an existing or new customer - often begins with originations. And as any credit provider will know, with the originations process involving numerous steps, striking the intricate balance between customer experience and credit risk can pose a significant challenge.
In other words, if you seek too much information of the customer you run the risk of deterring them from the process altogether. However, if you ask for too little information you could potentially make the wrong credit decision that may result in allegations of non-compliance, or fraud or policy breach.
It’s well known that dated technology and legacy systems result in long winded and labour intensive procedures. They lack the back-end sophistication to quickly process or leverage internal / external data assets, which results in negatively impacting the customer experience, and reduce the ability for the business to make rapid decisions automatically and confidently.
There has been some progress, but many businesses are still far from matching the current consumer expectations.
New solutions to old problems
Thankfully, there are a number of services and solutions that can help credit providers keep up with the rapidly changing originations process, and help improve their consumer experience.
Platforms that serve to automate the entire application approval process, using integrated systems and operationalising data in order to make rapid and accurate decisions by eliminating the lag experienced during manual processes. Offering pre-qualified personalised offers immediately can help turn that lead into a customer very quickly, fast-following that with a full digital onboarding solution is now enabling progressive businesses to process a loan application and providing the decision in minutes whilst having the funds disbursed within the hour. This will quickly become the new norm.
While we can leverage data and technology to make the process faster and frictionless, we still need to ensure the challenge of data and identity security is thoroughly addressed.
Our recent Global Fraud and Identity report found that 74% of consumers indicated greater confidence in business that used physical biometrics. Biometric security checks such as device intelligence and facial recognition now provide enhanced ID verification and fraud detection, and can be achieved digitally with astonishing accuracy and speed.
There’s no denying it. Consumers have a better understanding of what is best for them than ever before, and applicants now have a hundred and one options when it comes seeking a loan. Lenders, however, only have two: keep up, or get left behind.
By Richard Smith, Principal Consultant Experian A/NZ
Richard provides advisory services to banks, telcos and utilities across the region to help transform their credit decisioning capabilities, increase revenues, productivity and customer experience.
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