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Digital disruption changes rules for lenders

For years, financial services organizations have competed for consumers’ business. This competition has historically been based on the size of these organizations’ branch networks and the convenience of their branch locations. With the preference many consumers had for interacting face-to-face with tellers, ease of access to financial accounts, financial services, and personal advice depended on proximity to a branch office.

Fast forward to today. Digital disruption and changing customer expectations are forcing retail banks, credit unions, and other finance-related businesses to think about ease of access and customer convenience in very different terms. Competition now is based in the speed and performance of their websites, the ease of online transactions, and the efficiency of account application and approval processes.

To facilitate the anytime, anywhere access that consumers have come to expect, most financial organizations now offer a wide range of mobile services, including the ability to check account balances, to deposit checks, and to make person-to-person payments. The rise of financial technology companies (fintechs), who fund and develop these new services, is driving much of the disruption that’s occurring. Without the cost burden of large branch networks, more nimble players can spend more on technology and marketing to create new capabilities and drive demand for lower-priced services. This enables them to compete with some of the big industry players for the more profitable parts of the business, such as fees related to payments and transfers, origination fees, transaction fees.

One of the most important areas to address is digital customer acquisition. Incorporating mobile capabilities into their offerings helps traditional organizations better retain existing customers. Without reducing friction and improving the success rate of online applications, it’s going to be hard to grow an online and mobile-channel-preferred customer base. Yet the amount of information that digital loan or credit applications request often leads to frustration, errors, and even abandonment.

The abandonment rates for digital credit applications, for example, are similar to those experienced by ecommerce organizations. The online abandonment rate is around 60% of all applications and the mobile abandonment rate over 90%. It’s not that the applicants give up completely. Like online and mobile shoppers, they either run out of time or patience or lack the right information to complete the transaction. Often they’ll return later to try again but that might be with another lender whose website and application forms are more user friendly.

To estimate risk, lenders need a range of information about the applicant’s income and credit history. To comply with regulations, prevent fraud, and perform a credit check, they also need basic identification information such as current and previous addresses, age, and spouse’s name. The challenge is to streamline the application process as much as possible, reducing the amount of information required, automating form filling where possible, accepting digital copies, and systematizing the decisioning process. Even as banks and lenders seek to simplify their processes, it is essential to maintain data quality to prevent potential downstream issues. Quicken Loans is the preeminent example of digital financial application processing. In 2016 they introduced Rocket Mortgage, making them one of the first fully online mortgage lenders. In January 2018, they became the largest mortgage lender in the US.

For lenders who want to start down the path of improving their online applications process and their customers’ online and mobile experiences, Experian now offers Instant Form Fill. It’s an API that’s built into the online application process and that leverages Experian’s File OneSM credit header data to prefill forms with minimal input from the consumer. Requiring just four pieces of consumer data (first name, last name, zip code, and the last four digits of the applicant’s social security number), Experian Instant Form Fill reduces data entry by up to 76 percent!

Do you want to ease form completions, increase conversions, and improve your user experience? Experian Instant Form Fill makes online applications quick and easy.

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