As the last few days of 2020 played out, one looked back at the year with just a tinge of “good riddance” in the heart. After all, the year had begun with much promise; this was the year that ‘Vision 2020’ would come to fruition and all the ‘Trends for 2020’ would become everyday reality. Oh, 2020 had such a nice ring to it!
Little did we think that hoodies would become the hottest business attire of the year, or that we would learn a new term, “Social Distancing”, the inherent irony of the oxymoron notwithstanding. And we were signing off emails and calls with “Stay Safe”!
But dark clouds do indeed have silver linings. What 2020 did achieve is to bring digitalization of financial services delivery front and center and make it the #1 priority. After all, if customers can’t come to the bank, then the bank must go to the customer – even the non-Millennials.
2020 also heralded the era where we are all inextricably tethered to our devices and AI drives what we watch, who we date and indeed, how we engage with the world.
So, what does this all mean for lending and asset finance companies? How do they address the traditional challenges as well as the new ones brought on by the “new normal”? Most importantly, how do they survive in this age of Instant Gratification?
It’s about the Experience
Ownership of a product holds less meaning to today’s consumer than it did a decade ago. Having witnessed firsthand their parents struggle to come to grips with their assets losing equity during the global financial meltdown, they believe that things are momentary, whereas experiences are timeless. A product sold does not automatically translate into a happy customer; but a ‘wow’ experience at various moments of truth would almost certainly turn a customer into an advocate for the brand.
For lenders, this means an opportunity to transform the overall journey from a transaction to a lifecycle, by converting every interaction with the customer into a memorable experience. Interactivity, intuitiveness and customization are the topmost criteria for most customers today. Since the origination process is the first touch point to the customer, lending institutions need offer a personalized origination experience taking into account customer relationship as a whole rather than one product or service at a time.
The need of the hour is for a robust servicing platform backed by futuristic technology. Do away with the lengthy processes and cumbersome offline protocols. There is a need to accept, process and decision credit applications in a paperless mode, with a single data entry process. Lending and leasing institutions should be able to provide seamless channel integration to ensure an application can be started and closed on different channels of customer choice.
It’s about ‘Here’ and ‘Now’
“If my ride can arrive at my doorstep in 5 minutes; if my food can be delivered in 30 minutes; and if my e-commerce transaction can be fulfilled on the same day, all of this with the click of a button, then surely I don’t need to wait for days to get a loan or go to a branch…”
If that sounds familiar, it’s because traditional lenders haven’t embraced technology like their peers in other industries have. Uber wasn’t built in a day, but today ‘Uberization’ personifies Instant Gratification. Waiting is not appreciated and instant servicing is the greatest differentiator.
Lending platforms need to talk the language of their consumers. This means that from credit decisioning to the processing and fulfilment of the application, the entire procedure needs to be lightening quick – at least quicker than the closest competition. This is only possible if the underlying technology facilitates fast processing with smart business insights and real time reciprocation of consumer choices. And this should all be done in a manner that the consumer still sees things as if they were just one touch away.
It’s about “Know me, Empower me”
Traditional lending practices have placed credit history above all else, which means that entire segments of potential customers have fallen outside the net due to a lack of proper credit history. Compare that to today’s FinTechs who have aggressively used any and all available data to not only create a whole new segment of customers, but also poach them from the existing lenders.
Consider this: Many FinTech lending platforms assess borrowers not just on their available credit history, but also by looking at other credentials, such as the pedigree of their educational qualifications, and leveraging Machine Learning to analyze purchase and payment transactions and in some cases also the reviews that customers of businesses leave on social media like Yelp or TripAdvisor.
The right use of customer information should occur at the right time and this is only possible with digitalization of processes. Lenders not only need to offer the right mix of products and services at the right time, but also keep the customers informed about the entire process on their channels of choice while making the process interactive. This should be topped with the best prices based on the customer relationship and previous records. Digital technologies can also facilitate the minimization of delinquencies through better business intelligence and insights from consumer data gathered over the course of the relationship with the lender.
Any kind of negotiation, resolution or pay back can happen with the proper bucketing of customer data. This can potentially change a process that is perceived as painful and uncomfortable by many to a memorable brand experience that can increase the net promoter score for lenders.
It’s about Servitization
Servitization is the delivery of a service component as an added value, when providing products, and is a growing trend in Asset Financing. It has the potential to radically alter the way manufacturers go to market. In some servitization models, the customer owns the product and takes advantage of related services; in other models, the product itself is provided as a service. The servitization trend capitalizes on consumers’ growing comfort with subscription or ‘as-a-service’ offerings and buyers are beginning to expect the same experience in their B2B interactions.
With servitization, manufacturers can deliver the high-quality, personalized experience that customers want, with a complete service offering – from product selection to installation, maintenance, upgrades, insurance, and consulting. By improving the customer experience, manufacturers foster longer relationships with customers, increasing profitability, and customer loyalty.
To capitalize on the servitization trend, asset manufacturers need a lending and leasing system that can accommodate flexible terms, such as pricing per mile or hour, or a combination of traditional rental and usage fees. Internet of Things (IoT) is a crucial enabling technology underpinning the rise of servitization. IoT enables products to automatically communicate data about product usage, location, condition, and performance between all parties’ systems and devices, facilitating usage-based payments and superior customer service, from managing and planning maintenance to upgrade opportunities.
Servitization also enables customers to enter into a flexible lease based upon actual use of the product. If customers use the equipment for less than the contracted timeframe, they pay less. If they use the equipment more, they spend more or return the equipment at a predetermined product lifecycle threshold. This is a win-win for both customers and manufacturers as the customer only pays for what is used and the manufacturer doesn’t have to recoup a depreciated asset.
And finally, it’s about keeping it Simple
Interactivity, intuitiveness and customization are the topmost criteria for most customers today. This means an intuitive process with data based underwriting and centralized documentation of customer details. On top of it, all of these features need to reflect in a truly user-friendly user interface.
Digital ways of consumption of products and services are clearly here to stay and it is only going to get more sophisticated in future. As automation becomes imminent across lending products, a digital platform becomes an obvious choice for the aspiring leaders in the industry and a sturdy lending and leasing engine with a modern architecture, complete with support for IoT and the flexibility to adapt products to a subscription-based offering can go a long way in this context.
An article by Vijay Kasturi, Head of Sales & Business Development – Western Europe at Profinch Solutions