Strategies for Rebuilding Consumer Loans Post-Covid

 

Here are strategies recommended by Kremer and D’Acierno for making the comeback:

1. Meet credit-ready consumers where they are looking for credit.

Traditional outbound marketing, even in digital forms, depends on grabbing the right eyeballs at a time when the consumer is actually seeking credit. That’s a tough challenge, according to Kremer. He suggests that financial comparison sites, such as Bankrate.com, The Ascent and NerdWallet, present a better opportunity for exposure.

Today’s consumers, should they not have an offer of financing directly with their prospective purchase, are not going to wait to stumble across a web banner promoting loans, suggests Kremer. Proactively, they go hunting the best credit deals, he says, and the comparison sites are the first stop.

2. Seek opportunities where people are seeking new credit.

Even as the “new normal” continues to unfold, a key opportunity for lenders is the home improvement market, which began during the pandemic, and continues to grow, according to D’Acierno.

D’Acierno points out that home equity credit, a classic source of home improvement funds, continues to erode for two reasons. First, consumers have found it cheaper to include remodeling funds in a cashout refinancing over the last year or so. Second, unsecured personal loans don’t have the hassle that home equity credit does and are relatively cheap at today’s rates.

The consultant says the banks and credit unions need to give more thought to new product design as competition heats up. A nonbank player that he points to as a trend of the future is PowerPay. The company offers unsecured credit at purchasing time through both home improvement contractors and dealers, and decisions are rendered quickly. There is nothing this fintech is doing that couldn’t be done by a bank or credit union, even on a more local basis. The innovation here is in packaging and distribution, D’Acierno adds, rather than in the loan itself.

3. Stop bringing paper to a digital fight.

There’s no going back from the reality that shutdowns and social distancing accelerated demand for digital services. Kremer believes many consumers have grown more used to conducting financial business online, so financial institutions that don’t offer digital ways to apply for credit will be competing at a disadvantage.

“You have to make it as seamless as possible to get a loan,” says Kremer. “So it is even more important now to be prepared and have the systems in place as more people begin borrowing again.”

Where institutions can form partnerships with ecommerce players, that will add entrée to an institution’s digital credit capabilities. D’Acierno points out that the companies behind the “buy now, pay later” trend started out as “fly specks” and grew and grew. So ecommerce partnership doesn’t exclude smaller financial institutions. Some of the most active banking-as-a-service players are community banks.

Automation grows increasingly important because consumers want fast responses nowadays. D’Acierno thinks the desire for instant gratification can’t be overstated.

The Financial Brand