The pandemic forced lenders to quickly adopt technologies to provide an easy online experience for borrowers. As they return to normal, they've identified that customer expectations have changed. From this rapid shift, lenders are adjusting their customer experiences. They now have new technologies and are likely looking for ways to measure their impact.
Why Lenders Should Consider Measuring Return on Experience
Return on Experience (ROX) is a concept developed by PwC that allows businesses to measure their return from investing in experiences. This concept will become more important for financial institutions after the pandemic.
One of lenders’ biggest takeaways from the pandemic is that customer experience is everything. If they aren’t able to provide their customers with the most convenient experience, then someone else will. We’ve observed alternative lenders like Square continue to gain more traction throughout the pandemic as they increase their offerings and enable customers to access more products on their digital platform.
With emerging threats like these, it’s important lenders have an understanding of how their customer experience compares to other financial institutions, even if they’re not specifically measuring PwC’s version of ROX.
Three Factors That Impact ROX
There are many factors that affect ROX, however, here are three of which lenders need to be mindful.
- Employee Experience: To provide an exceptional experience for customers, financial institutions should first focus on their employee experience. Employee experience has a direct impact on customer experience, even if every employee isn’t in direct contact with the customer. PwC highlights three categories that employers are currently focused on to improve employee experience: 1) purpose, brand, and culture, 2) design of the workplace and work, and 3) workplace digitization. Culture is one of the most important qualities that job seekers look for in new employers. It’s important that lenders provide a culture where employees feel supported and empowered to execute meaningful work. To empower employees to be the best they can be, they need adequate resources. In today’s environment, the best resource lenders can provide their employees is technology and education on how to use it.
- Meeting the Customer Where They Are: With self-service on the rise, it would be easy for lenders to assume that an online presence is all they need to be successful, but this couldn’t be further from the truth. As lenders move beyond PPP Forgiveness, they will find success in meeting their customers where they are. Some customers will opt for an entirely virtual experience with no additional support required. Others will seek an in person meeting at the branch location to be guided through the lending process. No matter what avenue the customer chooses, it’s important that they have the ability to decide how they interact with their financial institution.
- Technology: The pandemic highlighted technology gaps in many organizations. To compete with tech companies, alternative lenders, and the like, it’s important that banks and credit unions focus on implementing technology that provides customers with a seamless experience. Features customers are looking for in a digital lending platform include simple applications, fast decisioning, and frictionless closings.
Why Lenders Can Charge a Premium for Enhancing Their Customer Experience
The opportunity ROX provides isn’t one that lenders can afford to pass up on. Online banking competitors are currently charging much higher interest rates than traditional institutions, and, even with these significantly higher rates, borrowers are still choosing online options because they offer a more convenient experience. These users are able to get funding within minutes—instead of hours or days—with a frictionless experience every time.
Numerated partners have seen this in action. At a BAI conference in 2019, Dollar Bank SVP Dave Weber told us about a customer he came across that took a loan from a lender with a 47 percent APR on a short-term business loan.
Banks and credit unions that should be winning on competitive pricing, are instead losing out to alternative lenders that can provide convenient experiences right in the customer's home. This shift in sales targets is one banks and credit unions can’t afford to ignore. When lenders focus on providing a fast and convenient customer experience, they too can charge a premium for their products and win back lost market share.
Three Characteristics Lenders Should Look for in Fintech Partnerships to Improve ROX
For financial institutions to achieve this level of digital transformation, they will need to implement technologies that support their goals. Partnering with a fintech is the best step a bank can take to accomplish this.
Evaluating partners can seem like a cumbersome process, but it doesn’t have to be. Here are some things to consider when seeking fintech partnerships:
- Emphasis on Customer Success: It’s important that fintechs provide their lenders with all the tools they need to be successful using their platform. One of the most impactful ways fintechs can support customers is through efficient implementations. For some fintechs, it can take over a year for the platform to be implemented. In today’s fast-paced environment, waiting a year isn’t feasible for many lenders. After the platform is implemented, it’s important for institutions to have resources to successfully continue the use of the platform. Helpful resources to look out for include one-on-one customer support, a library of educational tools to reference, and extensive platform training for employees.
- Efficiency Gains: In today’s environment, borrowers are looking for a solution that is easy and saves time. This is an important factor that should be a top priority for lenders evaluating technology partners. Factors to consider when making this decision include the amount of time borrowers will save using the platform and how the platform will improve the user experience (UX) when applying for loans. The goal when adopting a new platform should be for a customer to be able to complete the entire application quickly, whether they prefer a self-service approach or one that is banker led.
- End-to-End Solutions: An end-to-end solution allows an entire application to be completed from origination to closing in one location and is extremely efficient for both the lender and the borrower. Lenders are enabled to make faster decisions through the ability to have all of the information in one place, and borrowers are enabled to quickly work through an application without being redirected anywhere else, thus creating a more convenient experience.
When it comes to customer experience in 2021, digital transformation should be top of mind for all lenders. Without the ability to implement a digital platform and a method to measure its impact, it will be nearly impossible for financial institutions to remain competitive.
To learn more about Numerated’s digital lending platform, contact us to schedule a demo today, or register now to save your seat for one of our upcoming weekly webinars.
