Competition in the financial services space has reached boiling point, heaping pressure on the world’s banks and financial institutions. And it’s hardly a secret that customers faced with friction are frustrated and considering their options.
The World FinTech Report 2021, published by CapGemini and EFMA, references key areas of bank friction, two of which are central to the drive for profitability for both banks and fintechs alike. In answering the report’s ‘Voice of the Customer’ survey, 30% of banking customers said they face high friction when applying for a loan or mortgage, whilst 28% cited the issue when opening a bank account.
Smoothing out a cumbersome process
The application and onboarding process is littered with friction points, with research from Oliver Wyman, for example, highlighting that it can take 90-120 days to overcome obstacles and onboard banking customers.
In a world increasingly shaped by the likes of Amazon and Apple, today’s consumer and business customers won’t tolerate such lengthy processes any more.
Banks and other financial institutions are shooting themselves in the foot in the race for profitability. Any other business creating this much friction for a third of its customers would rightly be pilloried. But banks continue to do so, despite the fact that, thanks to Open Banking and other data sources, there’s now a plethora of data being collected from customers with their consent. There’s really no reason why friction should be a reality.
For either credit applications or account opening, yes, there will always be regulatory requirements that can’t be avoided, but there are intelligent ways of meeting them. One historic example from the consumer lending sector is the requirement to undertake creditworthiness and affordability assessments that include existing credit commitments and household expenditures, and how these have evolved over time. The chart below portrays it best.
The obvious takeaway here is that if you can obtain data from a third-party source, a process supercharged by the implementation of Open Banking, then don’t ask applicants for it! This makes the user journey simple and frictionless.
It’s now possible to create ready-made loan offers for existing bank customers without having to ask eligibility questions, vastly improving the application and onboarding user experience.
This may seem a big ask, but consider this:
- Existing current account customers have the account into which their salary is deposited, and from which credit commitments and other bills are paid.
- The bank, or fintech, already knows the tolerance that a customer has in terms of their free income, thanks to their use of behavioural measures.
- The lender can also access sufficient Open Banking data to estimate the interest rate being paid on existing credit commitments.
- The lender can then create and market a loan offer to the customer, with the user journey shortened to merely asking the customer to confirm the information held is correct.
Make no mistake, this is a huge opportunity for current account-holding banks and fintechs to hold a greater proportion of customers’ wallets, boosting profitability as they seek to recover from the disruption of the pandemic.
Partnering with Ezbob
As the financial services ecosystem continues to shift around us, we’ve launched Ezbob Express, our new high-speed, data-driven customer acquisition platform.
It’s a modular SaaS platform that delivers more customers to companies, in a more profitable way. The advanced cloud-based modular design offers unmatched deployment speed and flexibility – exactly what today’s financial institutions need to stay at the forefront of their customers’ thinking. It’s also enabled us to move beyond lending and account opening solutions to offer our clients support on a wider array of financial services products, such as overdrafts, credit cards and asset finance.
Ezbob Express’ modular approach enables financial institutions, and non-financial brands that wish to integrate financial services into their offering, to add the functionality needed to achieve a best-in-class digital experience.
Get in touch today to discuss how we can help your organisation.