Consumer loans: Why can’t banks partner nicely?

As it stands, Mr and Mrs Jones apply for a bank loan. They can be in full time employment, they can own their own house, and they can be refused credit from their bank of twenty years because ‘computer says no’. Maybe they missed a mortgage payment a couple of years ago.

These people, and there are literally millions of them, then feel angry at their bank, and go and get a loan from any one of a number of other sources, often at a significant rate of interest.

The banks are literally turning away their own customers, all day, every day. And in doing so, drive customers towards their challenger lenders and competitors. By reducing their lending risk, they are vastly increasing their commercial risk.

The opportunity is clear, obvious, and easy. Any remotely agile commercial entity would have seen it and implemented it years ago. So why haven’t the banks? (Genuine question)

Pick a partner. So when Mr and Mrs Jones go for a loan, and computer says no because of some probably irrelevant data point, they aren’t sent away feeling like rejected and unwanted customers. Instead they are immediately offered a solution from the Banks preferred partner. ‘Oh Mr and Mrs Jones, unfortunately our lending criteria don’t fit your requirement today, let me pass this through to our trusted partner, XYZ Credit, I’ll run the check with them now… Oh good safest place to buy levitra online news, it’s approved, would you like to proceed? The money will be in your account today.” The Jones are happy, the bank gets a commission and takes none of the risk of the loan. Perfect. Obvious. And yet not happening, and not likely to anytime soon.

Is there a regulatory reason for this? Or is it the banks attitude to Reputational Risk of Strategic Partnerships. Their partner might make them look bad. This seems logical, until looked at with open eyes.

The Banks, almost all of them, already have a well deserved reputation of market rigging, money laundering, and varying degrees of corruption and shadiness. The greed and financial recklessness of the banks plunged the country, indeed much of the World, into recession. People still remember that. By turning away their own customers for simple credit products, they compound the negative perception of themselves. Their reputation is shot anyway, they shot it themselves, and further upsetting customers by implying they aren’t trustworthy for a loan to fix their car is not going to help repair that reputation.

Yet they see the risk of strategic partnerships as being greater than the risk of doing nothing. Commercial paralysis has clearly set in. They’re calcified, and they’ll be talking about the risk of sailing on unfamiliar seas long after the last boat has left the sinking island.

[author title=”Bird Lovegod” image=””][/author]


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