COVID-19 Europe Fintech Lending

Lending: How to Lose a Customer in 10 Ways

With the global pandemic continuing to negatively affect the economy, businesses are struggling to navigate the challenges that it brings. Though the government provides a variety of support packages, the pressure is on lenders to fill the gaps due to an increase in loan applications. However, while many are taking advantage in their customer growth, some lenders are yet to make the most of the situation. 

One person who has some thoughts on this situation is Matt Cockayne, Chief Commercial Officer at Yapily, an enterprise connectivity platform. Yapily powers a variety of financial applications with API through open banking, and here Matt discusses his 10 ways lenders may be losing customers and what they can do to avoid it. 

There’s no denying that the economy is in a state of shock right now. Businesses large and small are contending with the challenges brought on by the global pandemic. And with the situation changing daily, and with virus surges causing local lockdowns – businesses are fearing going bust without financial help. `

Many are still relying on the much-publicised government-backed loans to ride out the pandemic. But as demand for financial support continues, lenders are facing more scrutiny for their role in distributing these vital funds, with some even being accused of endangering the survival of small UK businesses.

No one could have predicted the impact Covid-19 would have on the economy. And for lenders, they have had no choice in many cases but to be stricter, adding more stringent criteria to manage the surge in loan applications. But while shutting up shop to new customers is a route some could take, it disregards the fact that the current economic environment is, we hope, only temporary, and there are still far more businesses who are in desperate need of funds. So growing a customer base is still just as important as retaining existing accounts.

There are already savvy lenders out there, who are spotting this opportunity to grow and expand their list of customers. However, there are still some who aren’t quite getting it right.

Here are 10 things lenders may be doing to drive customers away, and how to correct them:

  1. Slow communication

One of the quickest ways to lose customers is making them feel that their time is not important. And right now, many business owners are worried about their situation, and their time is money.

Lenders must be quick at responding and communicating with their customers. Whether this is managing their expectations, or guiding on the best lending choice – in these tough times, communication is key. Making quick decisions using real-time data will help here.

  1. Lack of personalisation

Every business situation is different, and every business needs a lending option unique to them. By offering set, unpersonalised options, customers are limited to how they can respond to the effects caused by the pandemic – which can be detrimental for their survival.

Harnessing Open Banking means lenders can distribute hyper-personalised products to their customers. By sharing real-time information, recent transactions or saving account information, lenders are able to make fairer and much faster decisions.

  1. Manual processes

Slower, more traditional methods of providing loan options take time, which many SMEs simply don’t have to spare – manual, paper-based loan approval procedures mean slower decision times, data inefficiencies and an overall reduction in productivity.

By digitising processes, speed dramatically improves – thanks to instant access to up-to-date financial information via Open Banking APIs, loan decisions can be sped up and funds can be received directly into accounts far more quickly.

  1. Limited options

Businesses want options – they want to know they have found the right lending choice for them – especially right now when they can’t afford to make the wrong choice.

With access to real-time financial data via Open Banking, lenders will be able to give customers tangible choices based on their actual financial position, not estimates. Offering varied options will also allow for lenders to innovate and attract new customers based on their flexibility or differences.

  1. Lack of innovation 

Innovation is key for lenders during this uncertain time. As the world comes to terms with this new digital way of living, lenders need to cooperate and work alongside this innovation, to fulfill the requirements of their customers.

Through harnessing Open Banking, lenders can unlock new revenue streams, and a sustainable service model for underserved markets. They can then offer the digital support and services customers now desperately seek.

  1. Lack of transparency

Often the rationale for providing loan terms or rejecting a loan application is opaque at best. And especially during such a time of heightened tensions already, this lack of transparency can create an atmosphere of distrust, ultimately driving lenders’ customers away.

Lenders should over-communicate with customers, explaining how they have reached their term conditions. This is made significantly easier through Open Banking, as the decisions are based on the information found within the customers’ own accounts as opposed to generalised data sets. Lenders could offer information and advice, specific to the financial position of the business in question.

  1. Security

Long manual processes cause inefficiencies and put customers at risk of fraud – it also increases the risk of human error. Take CitiGroup as an example. The bank mistakenly transmitted $900m in payments whilst upgrading its loan platform because of human error.

Open Banking uses APIs to deliver fast and highly secure data transfer, and is only shared with who you want, when you want and how long you want it to be shared for. As processes are digitised, there is no risk of human error and inefficiencies.

  1. Outdated information

To successfully generate the best lending decisions, lenders need to know a businesses exact financial position. By relying on outdated, historical account information to make critical lending decisions, lenders are not in a position to offer the best option.

Open Banking gathers data using API connectivity, whereby it securely extracts the information needed, in real-time to provide lending choices best suited to the customer.

  1. Added costs

We are in a time where it’s not an option for money to be wasted. Traditional methods of lending include ‘hidden fees’ for customers – payment transactions, administration fees and penalty charges for example. And by harnessing Open Banking, lenders have the option to eliminate these costs for their customers.

  1. Bad lending decisions

Cumbersome affordability checks are exposing companies to more risk which is causing a bottleneck for favourable borrowing.

Through harnessing Open Banking APIs, lenders can build an accurate picture of their customers in real-time. Combined with deep-learning technology and data enrichment, this provides access to categorised transaction data to uncover invaluable insight. From spending patterns, sources of income, debt and identity verification, lenders can build a customer profile to deliver customised capital suited to the borrowers needs.

As our economy lies in the hands of business survival, it’s time for lenders to do everything in their power to support those in need. Through harnessing Open Banking, lenders are able to quickly assess client spending habits, and make fairer and much faster decisions about how much can be fairly loaned to them.

Now is the time for lenders to digitise their lending cycles, and improve their customers experiences. Not only will this grow their own customer base, but it will also help speed up our country’s recovery, and support far more businesses as we head into a post-covid world.

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