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Disruption in Consumer Finance Industry

By April 27, 2020No Comments

By: IDology

How Lenders and Consumers May Co-Exist in This Time of Uncertainty

Lenders and Borrowers Looking for Equilibrium

The COVID-19 response playbook for the online consumer finance market is now in full adoption. Concerns about operability, and deep losses are top of mind for lenders; while borrowers, and prospective borrowers, most impacted will be those already vulnerable to economic shocks.

Some lenders are dropping anchor. They’ve stopped growing, and are focused only on existing portfolios. They’ve pulled back on marketing. Their plan is to weather this disturbance, and wait to get on the other side of it.

Other lenders are steady the course. They recognize an opportunity to serve consumers; even with significant risk in play. They’ve tightened up underwriting. Their plan is to gather data, and look for the right strategies to serve consumers with unsettled circumstances.

Online lenders with an extensive track record should already have a deep understanding of customer wants and needs, but in this time of disruption borrowers can expect lenders to make available loan forbearances, payment extensions, and other payment plan modifications. A key for success will be to align the right loan modification option to the individual borrower’s situation.

Speed to Change in Service

For obvious reasons, online lenders are accelerating timelines on projects to remove some of the manual processes that rely on heavy in-person staffing.

Across the board, lender service center operations are struggling. Market data shows a huge uptick in customer support requests, but lenders who can’t function without fully resourced call centers will most certainly have to pull back, and may struggle to rebound post COVID-19.

Lenders who use proactive engagement tactics, and who have deployed mobile apps, online self-service, live two-way chat, and automated fraud prevention features will be well prepared to support customer service.

Finding Shelter from Fraud During Stormy Business Climate

In times like these fraudsters will use disruption to strike harder. Lenders should be asking themselves if their current verification, and fraud detection systems are effective. Change may not be possible in the short term, but now is a good time to think about a post-COVID-19 environment. Lenders should begin a serious examination of their verification and fraud control systems.

Can the lender verify identity, and detect fraud without friction? Is the lender securing the borrower’s identity data? Will the verification and underwriting process stand up to increased consumer traffic? Is there a heavy dependence on manual review? Could the verification systems stand up to potential regulatory, or compliance changes? How will customers respond if more friction is needed to verify identity? If the answer to any of these questions is no, then now is the time to find providers who can help.

Online lenders have always been a lifeline for consumers who find themselves in a storm. Lenders will have to make tough decisions, but those who act quickly, and adapt to this storm will be able to look back at this time with pride; knowing they were able to well serve customers in crisis. These lenders should emerge as stronger, more competitive businesses, in an increasingly competitive consumer finance marketplace.