Every fourth bank in Germany participates in a digital platform or has built one itself. Another 27 percent intend to do so. This is the result of our study Industry Compass Banking.
Many institutions are still struggling to decide what role banks want to play in the platform universe – operators, suppliers, users. A scenario from the consumer credit segment shows how banks can turn their own online banking world into a credit brokerage platform.
The consumer loan market is highly competitive
The consumer loan market is highly competitive. Marketplaces like Sure24 and OnlineCredit as well as fintech like Good Finance have intensified the competition. Nevertheless, new players see enough growth potential from time to time and enter the market with the goal of getting a piece of the cake.
This includes, for example, the relatively new Click range from the Austrian BAWAG Group. Many banks are also working to offer customers a fully digital and largely automated credit process and thus a positive experience. To ensure that not only the crumbs of the credit cake remain for the established banks, the optimization of lead management is extremely important.
What is meant is to turn prospects into potential customers and turn them into satisfied or even enthusiastic customers who recommend the great loan offer, the service, and the simple procedure. These so-called leads apply and compare loan offers, preferably online. The share of consumer credit closed online was only around 15 percent in 2017 and 2018, half of which was sold through comparison portals.
It can be assumed that this share will increase significantly in the next few years, and comparison portals will provide a considerable share of this. Banks can now try to counteract this with digital excellence and their own platform initiatives. However, this will hardly succeed in the medium term. Another option is that banks put their unique selling proposition, the strong customer trust and the many account business relationships in the balance.
Specifically, banks should look after their leads, who choose the direct route via online application forms, as intensively as possible and focus on the conversion rate. You should support everyone interested in a loan with maximum effort to get a loan – and not necessarily a loan from your own house. This will not always be possible for reasons of risk management and business policy. In this case, banks should also refer to products from another provider or even offer the transaction. In this way, a positive experience with the bank can be remembered by the customer.
Banks broker foreign loans through their own website
Any interested party who ends up looking for a suitable consumer loan on the bank’s website could be looked after by the institute according to the following procedure:
- Re-targeting: Interested parties with an incomplete online application should be addressed as automatically as possible or actively advised by bank advisors using a standard procedure via email, SMS or telephone so that they complete their online loan application.
- Hurdle-free fulfillment: prospective buyers with complete credit data should also provide banks with active and intensive support and inform them about the status and further procedure via the channels described. The loan offer should in future be transmitted digitally without any hurdles.
In practice, however, it often happens that prospective buyers do not receive suitable loan offers for various reasons: the income is low, the prospective buyer is already paying off other loans, or the creditworthiness is insufficient and they cannot offer sufficient collateral.
In order to act in a customer-centered manner, banks should not only formulate a friendly rejection letter at this point but also use the opportunities to show their potential customers alternatives.
Either it succeeds in an institution restructuring its product management so that it has various alternative consumer loan offers in its portfolio (other loan amounts, different interest rates, installment loans with the determination of the individual maximum loan) or other loan-related products, such as a credit line.
The third option – and this is where the platform concept comes into play – is that banks try to place offers from third-party providers. A savings bank or a large bank could, due to the lack of its own offers, provide suitable loans from other banks or peer-2-peer providers such as Good Finance via its own online world.
Banks would thus become a sales channel for other credit providers and benefit twice: on the one hand in the form of an intermediary commission, on the other hand in the form of a satisfied customer who has a positive experience through the active brokerage of the bank. Customer loyalty and the probability of recommendation increase. In addition, the contact is maintained.
“Platforming” your own business model
Such a scenario is not absurd. Credit providers often have different credit rating requirements from potential customers and other target groups. It can happen that a prospect in bank A cannot get an offer at the desired time, but can definitely qualify for loan offers at bank C or credit market place C. As Bank A, you miss interest income when brokering to third-party providers, but this is offset by commission income. In addition, it remains with interested parties that the bank has taken care of his or her needs. The door for a future customer-bank relationship remains open.
Through this type of provision of banking products – in the specific case of loans – banks open up to the market and “platform” on a small scale their own business model. With mortgage lending, it is not uncommon these days to offer your own and third-party loan offers.
A trend towards opening up can be seen: The institutes now increasingly see their competitors as partners. You know, it’s also about who has the data and who will approach the customer from the sales side in the future. The industry is increasingly aware of the relevance of online banking with a multi-bank function, otherwise, the customer will end up at Bank B.
To be successful as a credit institution with such an approach, the following factors are particularly important:
- Strategic will go “other” ways as a bank, ie to act “open-minded” and to open up to the market
- Standardized credit processes
- Dynamic lead management
- User-friendly online application routes
Who would like to know more
There are many topics at the same time in the example: the future of banks, platform economy, customer focus. If you want to learn more about it and are looking for facts, we have put together a few links to further articles here in the blog and to our studies on our website.