Loan growth has taken off in 2021 as consumers react to a variety of new economic realities. Here are 3 keys to your institution winning new loans and improving your balance sheet.
By: Rich Givone, SVP of Digital Marketing Strategy, CS3 Marketing
In a radical reversal from 2020 when many consumers shunned personal loans, credit cards, auto loans, and other new debts, Americans have reentered the loan market with a vengeance. Consumer demand for auto loans and leases, general-purpose credit cards and personal loans was up 39% in April 2021 compared with the same period last year, according to credit-reporting firm Equifax Inc. April 2021 was also up 11% compared with April 2019.
What’s behind the big change in direction?
Last year, some consumers didn’t need to borrow because expanded unemployment benefits, stimulus checks, and a surging stock market padded their savings accounts. Beyond that, many other consumers didn’t want to spend money when they were worried about potentially getting laid off, and others, stuck at home, opted to delay discretionary purchases.
But with U.S. economy reopening despite the new variants of Covid-19 pressuring under-vaccinated states and the global economy, many Americans are newly confident in the economy after hunkering down last year. They are splurging on cars, vacations and eating out. Higher prices, especially for cars and trucks, have also driven new loan demand.
So how can your financial institution be there when your customers need you most?
- Cultivate Deep Relationships. One of the key elements of building an engaged customer relationship begins with information being communicated early and often. To build trust and mutual understanding, messaging must be conversational and focus on ensuring the customer understands your capabilities to help them. In general, customers need to understand that you are sincerely interested in getting to know them, and are looking out for them. They also need to know that over time, you will reward them for their business/loyalty.
- Tip: You know that you should have a formal, automated, multi-channel, multi-touch onboarding program – that’s the underpinnings of “communicate early and often”. But a continuation of messaging using the same technology, same channels, and same rigor for data & analytics must be part of your marketing efforts in outlying years, so customers you’ve been banking since year 2, 5, 10, or 20 know to talk to you when its time to apply for that loan.
- Leverage the Power of Trigger Marketing. Every month, up to 10 percent of your customers experience a “life event”, and up to 5 percent of customers and prospects shop for new loans as a result of those life events. Moreover, 78% of customers want financial guidance from their financial institution, but only 28% get it. Wouldn’t it be wise to know when consumers have something happening in their life, and what they might have a need to be shopping for so you can get help guide them – and ultimately earn their business instead of a competitor?
- Tip: Deploy a recurring trigger program that monitors for life event signals, and then uses automation to push messaging directly to customers who have triggered. Be sure to include SMS text and email, and also be sure to leverage your branch staff to call these customers as part of the program.
- Go Digital, Fast. After some hard learnings courtesy of the pandemic, its no longer news: digital lending transformation must become a top priority for banks and credit unions. Improving the customer experience through enhanced credit underwriting processes, leveraging modern technology (or by way of API’s to partner technology), leveraging available data and applied analytics (including alternative credit scoring), and making innovation a top priority in the C-suite – these are all mission-critical priorities for 2021-22.
- Tip: The time for half-measures is over. Its now an existential question for financial institutions: innovate, or go the way of the dodo bird.
There are multiple tactics you should employ to grow your lending portfolio, and there’s renewed opportunity well-underway for new loans in 2021. Heading into 2022 budget season, now is the time to get creative in how you win your share.
Rich Givone is SVP of Digital Marketing Strategy for CS3 Marketing. Having begun his early career in banking, over the past 20+ years Rich has held senior leadership positions serving the banking vertical in companies specializing in digital publishing, digital marketing, adtech, and martech.