How bank friendly is consumer friendly?

Mariann Harrison

How bank friendly is consumer friendly?

Author: Roland Papp, Lending Expert, Business Analyst at ApPello

Our question, that is open to several interpretations, puts consumer-friendly personal loans introduced on 1 January this year into a totally different light, the applications for which can be made 100% online as from 1 July.

We are talking about a certified consumer-friendly personal loan, which has been promoted with messages such as :

  • fixed repayments from start to finish
  • disbursement within a maximum three working days
  • loan application process is handled entirely online ( in our case, this is the most important )

The appearance of this new product is certainly to be welcomed because it assumes an advanced financial market from both the supply and demand side. To put it in simple terms, it is good for the banks because they have a new type of lending option and it is good for customers because the range of loan products available is expanded with a totally new product, which moreover, is Covid-19 compatible, that is, it can be fully arranged online. Thus the positive vibe is wholly justified and understandable. However, from the side of the bank, ‘the devil is in the detail’, as the saying goes.

Digitalization has gathered pace, but perhaps not sufficient pace

Last year, it became apparent to everyone that there was no avoiding coronavirus; one way or another, we were all going to come up against it: those who didn’t get sick from it could well have found that their workplace was closed down, those who until now had toiled in an office suddenly found themselves working from home etc. Banks functioning as the engines of the economy had no other choice: they had to digitalize virtually all their processes at maximum speed, not only their in-house operations but services and products as well, while everything had to comply with legal regulations, business continuity and operational security had to be guaranteed, IT security was a top priority and, if possible, the switchover had to take place in a customer- and consumer-friendly way. All these factors represented numerous risks and challenges last year and things won’t be any different in 2021: the list has only been extended with the new types of consumer-friendly loans.

Continuation along an obstructed pathway

Behind the full online administration – which becomes available from 1 July – of these new types of loans lie a number of complex online banking operations, furthermore, they are conditional on the banks being able to meet the lending requirements. Let’s just consider what a loan application consisted of prior to the coronavirus pandemic: personal identification, creditworthiness rating, agreement on the T&Cs, then a wait for the final decision and eventually, the money; and all of this required a whole folder full of documents to be signed – in person! The entire procedure was streamlined thanks to coronavirus, but only at the cost of the presence of a high-tech IT background. But, how can personal identification be verified? Where is the bank’s guarantee? And what reassures the customer? Should banks use their own platform or the product of a service provider? Who handles the data, where and how? Who guarantees data security? But if all of this is no picnic, then what sort of experience will it be for the customer? Is it even possible to customize the online space? Or will it become just an overly bureaucratic, cumbersome process that kills the ‘we’re online’ appeal stone dead?

And then, the whole thing needs optimizing for the mobile phone… moreover, in such a way that the design is at the same time a method of luring in the customer.

We are looking to a period full of challenges, but it is worth getting started

Despite the obstructed pathway, we consider that this mass of tasks requiring considerable complex problem-solving is, in fact, one of the greatest opportunities for banks on the digitalisation trajectory given added impetus by coronavirus. An online loan application process that can be conducted easily, quickly and conveniently may be the highest step creating added value in the customer experience; without a shadow of doubt, this can be the very best marketing and way of building the bank image – plus, it offers a route to the younger generation, for whom online-only financial transactions are totally natural. Of course, enforced digitalization is not a blessing to everyone. Every bank has its elderly customers, for whom a digital existence tends to represent an obstacle, while there may be some who simply do not have access to 4G 24 hours a day… That is, while supplying state-of-the-art netbanking conditions, banks must also ensure that not a single customer feels he/she has been left out…

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