Transforming the loan experience
GoCardless: transforming the loan experience
Simple and flexible digital platforms could be the key to improved customer repayment rates.
Recent survey data shows us that the risk of missed loan repayments, for a significant percentage of borrowers, boils down to customer experience. Whilst lack of funds is a major issue – and always will be – other barriers such as technology troubles and lack of clear information on when and how much to pay are also significant. This presents lenders with an exciting impetus to transform the repayment experience; if customers are offered a clear and easy-to-use digital repayment system, chances are they’ll miss fewer repayments. What’s more, a loan product proposition with a simpler repayment system and better options becomes more attractive compared to others on the market.
When asked about their borrowing experience, 84% of the 400 loan customers surveyed said payment experience is important to their overall borrowing experience. (GoCardless surveyed 400 borrowers who have taken out at least one personal loan within the last two years and had missed at least one repayment.) A large proportion (50%) of all those surveyed said they had missed a repayment or had made a repayment after the due date. Yet interestingly, whilst 50% missed their repayment because they did not have the funds, significant numbers of respondents highlighted experiential reasons as well.
Technology troubles led to 34% of borrowers missing a repayment, whilst 31% said they didn’t know which date their repayment was due and 21% didn’t know how much to pay. These sorts of figures can have a big impact on business and personal credit ratings; addressing them at a systems level could be transformative for both lender and borrower. And, whilst lenders have little control over borrowers’ lack of funds, by paying closer attention to the customer experience and addressing these issues, they could make a big dent in loan delinquency.
So what does a better repayment experience look like for the borrower? Survey data tells us that customers want better visibility, ease of use and control. In terms of visibility, 91% of those surveyed agreed that being able to see the status of all their repayments is important. Online repayments are hugely desired, with 87% saying they should be able to make repayments online. Managing repayments online seems like a no-brainer in today’s market, but barriers like paper Direct Debit mandates may put people off. Reminders ahead of repayment dates are also important – 87% of respondents would like this. And 85% said they would like to “set and forget” all upcoming repayments in one go.
Flexibility of payment method is also desired. Lenders who offer multiple payment methods may be more likely to attract customers. As would lenders who allowed borrowers to change the due dates of each repayment. Direct Debit has a huge potential to improve the customer experience, too: 92% of those surveyed would be happy to pay by Direct Debit if a lender offered it and 75% would be more likely to use a lender that offered Direct Debit as a payment option. This means that incorporating Direct Debit with a clear, flexible and easy-to-use digital platform could greatly improve customer numbers and repayment reliability.
Transforming the customer experience of loan repayments could be a win-win for businesses and borrowers. Automated payment collection platforms such as GoCardless offer to do exactly that – providing the clarity, flexibility and ease of use that could lead to better repayment rates.
This article is also featured in the June 2019 issue of the Banking Technology magazine.
Click here or on the banner below to read the digital edition – it is free!
