By Sharla Godbehere, Vertical Leader for FinTech & AltFi at Equifax
So, you’ve taken the leap and are officially open for online lending. Now what?
If you’re just getting started, you’re not alone. Increasingly, lenders are migrating online to meet customers’ needs as COVID-19 transforms financial services activities. Driving success in online lending doesn’t have to be overwhelming if you have the right steps planned out.
It may seem daunting, since you won’t be relying on foot traffic or personal relationships to serve customers. You need a whole new approach to grow and sustain your online business.
“While you may no longer have a ‘captive’ audience, you can still captivate your audience,” says Mary Jackson, CEO of Online Lenders Alliance (OLA). “There are plenty of opportunities to use your expertise, data and servicing touchpoints to attract and engage borrowers.”
Here are five tips to keep you on the right track and build your brand.
- Keep your content and offers relevant and fresh
You’ve created your online storefront to originate loans, but your customer may be coming for something more. They’re looking for a company that recognizes their financial situation, whether they’re just starting out, raising a family, or heading into retirement.
In the time of COVID-19, millions of Americans have lost their jobs or are dealing with unexpected expenses. You want to express empathy and an ‘in the moment’ understanding of what they’re going through in both your content and offers. However, recognize the risk of “COVID fatigue” as you build your messaging, balancing empathy with energy about the future.
Your offers should reflect customers’ needs. Many lenders are providing flexible options, such as flexible repayment options, longer terms, deferred or less frequent payments, or waiving any upfront fees to demonstrate a willingness to work with customers.
Staying on trend—such as making competitive offers that reflect your customers’ lending needs—can help you close the deal. For example, nearly 60% of adults say groceries are a higher spending priority right now than before the pandemic1.
On the content side, many lenders offer resources to help customers navigate the pandemic. You can partner with credit bureaus, financial assistance counselors, coupon services and employment agencies for value-add advice. Offering relevant, helpful resources to customers will be just as important in “normal” times. Serve them with content that will ensure they turn to you again and again as a lender and trusted advisor, in good times and in bad.
Your content can go beyond the loan offer to showcase your expertise and customer service, whether in a blog, on social media or through another channel. “Credit-building education and programs are popular, as well as initiatives that help consumers improve debt, save for a goal, refinance their home, or start a budget,” Jackson says. All of these efforts will aid your search engine rankings, too.
Gamification can appeal to younger consumers, helping them keep track of loan payments and making repayment rewarding. Puzzles, quizzes, videos and actual games can also be used to raise financial awareness. Some lenders offer points if a customer watches a series of educational videos, which can be redeemed for prizes.
- Generate high-quality leads
Finding customers is very different in an online environment. Third-party lead generators, such as Acquire Interactive and Leap Theory, are just a few of many who can help connect you with prospective borrowers who are interested in doing business with you.
The share of loans sourced by these platforms is expected to see an annual growth rate (CAGR 2020-2024) of 5.1%[1]. They distribute and offer leads for you to review and purchase, and your Lending-as-a-Service (LaaS) provider can prequalify the leads. The types of leads you’ll get is based on your price, filters and rules, past performance, and appetite for risk.
In this electronic marketplace, borrowers can submit information about their needs and qualifications and lenders can choose whether to make an offer. This approach works particularly well for underbanked, subprime or thin-file borrowers who need cash quickly and don’t want to submit their information multiple times.
“Demand for short term loans will rebound,” says Jon Geidel, SVP and GM, Alternative Risk, Equifax. “In Q1 demand was up 10% over 2019. While demand dropped to less than half of 2019 in Q2, consumers are receiving government support, spending less, and saving more. In Q3, we expect to see less government support creating an increase in demand which will further expand into the holiday season.” It pays to work with a platform that can put these borrowers in front of your brand, and a LaaS provider that can provide the end-to-end experience to serve them.
The lead process is entirely transparent with most lead-gen platforms. Most of these LaaS providers source their customers directly from borrower search engine results and other forms of paid marketing affiliate channels in order to offer opportunities to a wide audience of borrowers. The Online Lenders Alliance recommends that consumers be notified that the lead generator is not a lender and does not make loans or credit decisions. Once presented with a loan and its terms, the borrower remains in control about deciding whether or not to accept the loan.
- Refresh your data
General account management or portfolio monitoring is healthy hygiene, and a process you should do at least once a year. This ensures you have clean data such as correct addresses and proper formatting so that you don’t waste your marketing dollars. The better the data, the easier it is to optimize your marketing and drive conversion. And remember: It’s cheapest to solve data issues at the source.
Now more than ever, you’ll want to review your portfolios more frequently. With COVID-19 related unemployment up and credit delinquencies on the rise, your customers’ situations are changing quickly.
Account Review from Equifax, for example, lets you monitor credit scores or events like delinquencies as part of the account review process. You can also supplement periodic reviews with alerts that convey in near real-time about changes on an account, such as changes to employment status – whether they’ve taken a pay cut or lost their job outright. This can be a powerful way to assess their financial stability and ability to repay a loan.
Integrating customer permissioned data solutions provides customers with an easy way to directly connect their banking institution or provide their utility bill statements, as part of their application or as you grow your relationship with them.
Also consider in-market propensity data that helps you assess the likelihood that someone is going to respond to your offer. These can be custom-built based on your specific offer.
Additionally, your LaaS provider may be able to comb internal and external data to find trends in the credit industry and uncover new acquisition strategies. You can use these trends to change your overall buying strategy, lead decisioning engine depending on your goals.
- Anticipate borrowers’ needs
The U.S. Census Household Pulse Survey[2] reports that half of those surveyed have experienced a loss of household income since mid-March. Over a third expect income loss in the next 4 weeks. Consumers’ ability to make timely loan payments is no longer a given.
In response, lenders are offering forbearance, deferrals and other relief to borrowers as they brace for an uptick in financial assistance requests. This is just one example of anticipating what your customers need—in good or bad times.
Online lenders are now making more mortgage loans than traditional banks, and this trend is only increasing[3]. Expect that consumers, having been stuck at home for many months and looking to take advantage of low interest rates, will look to you for mortgage, refinancing or home improvement loans. Be sure your offer is credible and can stand out among the crowded field.
The savings rate has skyrocketed during the pandemic and small-dollar loans have indeed declined—67% since the end of February[4]. Yet among people with no ability to save, the need for personal loans will only gain steam in coming months.
For some groups, the holidays may also be a challenging time. Consider helping customers with layaway programs that let them pay for gifts over time with a small interest rate. “Buy now, pay later” offers may be another option to offer additional loans by partnering with retailers.
Understandably, you may have tightened lending standards for the time being. Fortunately, this recession is expected to be short. Many forecasters said they expect economic output to begin growing again in the third quarter[5]. When the uptick occurs, you’ll want to be ready to make offers again.
- Engage across channels
One of the best parts about going online is that you can go big or small with your lending program. You can market to consumers everywhere, in specific states or regions, or to those with specific needs.
You can repurpose your content, such as a blog post on “how to refinance,” for advertising on social media. With retargeting you can reach consumers who clicked on that piece of content to drive further interest.
During COVID-19, keep your message supportive. One national lender’s recent national TV spot to “a world that’s changing” is their promise to help customers “prepare for whatever the future has in store.” The lender promoted its competitive rate loans and flexible terms in the ad.
Another way to show an extra layer of support is through your servicing capabilities. You can service borrowers where they are—on social media, such as Facebook, email, chat and text. Experience management tools and real-time help desks can alleviate the customer response process.
Today’s borrowers want easy and intuitive experiences. When someone applies for a loan from their mobile phone at 3 am, show them you’ve got their back with quick decisioning, even if you can’t fund the loan right now.
If you know you’ve provided excellent service, you can send an email asking for a Google review or pleasant comment on Facebook. Consider implementing platforms such as Bazaarvoice, Yotpo, Trustpilot, or PowerReviews to help provide a dynamic voice to your customer and build brand trust. When customers don’t have a good experience, keep your focus on the service with an automated email thanking them for reaching out to you along with a quick, and human, response.
There are hundreds of lenders and plenty of liquidity out there. You can stand out from the crowd with a fast, easy and thoughtful experience and excellent servicing. And you can leverage your LaaS platform, data-driven insights and marketing tools to turn up your best customers and introduce you to new ones. These steps will put you on track to earning your customers’ business and winning in this profitable industry.
[1] Statista, https://www.statista.com/outlook/338/109/marketplace-lending–consumer-/united-states
[2] U.S. Census Household Pulse Survey, Week 12 (July 16-21), published July 29, 2020. https://www.census.gov/data/tables/2020/demo/hhp/hhp12.html
[3] https://www.washingtonpost.com/realestate/the-mortgage-market-is-now-dominated-by-nonbank-lenders/2017/02/22/9c6bf5fc-d1f5-11e6-a783-cd3fa950f2fd_story.html
[4] Online Lenders Alliance
[5] Comperemedia
