The financial services industry is continuously evolving, and it is essential to optimize collections strategies to maintain liquidity and minimize risk. One of the most critical choices for credit un...
The way financial institutions transact and communicate with borrowers has evolved, due in large part to changes in technology and a shifting consumer mindset. Likewise, as your customer base shifts to a larger number of Gen Y—or Millennials, as they're often referred—traditional forms of communication will likely fall on deaf ears. According to Entrepreneur, 85% of Millennials in the U.S. own a smartphone, so one can conclude that the best way to reach and market to this demographic is digitally and electronically.
And, it's not just Millennials. The fact of the matter is, all age groups are busier than ever with more demanding work, personal, and social schedules. According to Gallup, American adults that are employed full time work an average of 47 hours per week. For better or for worse, busier schedules and advanced technology has shifted the way that Americans communicate and interact—with each other and with businesses.
Some obvious examples:
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Drive-thru dining
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Voice-to-text messaging
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Skype and FaceTime
More specifically where it applies to financial institutions, technology has shifted the consumer relationship with their financial service provider:
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ATM transactions
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Bill paying
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Account opening and servicing
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Statement delivery
Consumers used to regularly visit brick-and-mortar locations to withdraw and deposit funds and have their accounts serviced. Now, they simply visit an ATM or log into their home banking portal to conduct a number of transactions. If a customer needed to apply for a loan, add a user to their account, or order more checks, visiting or calling their financial institution was the standard way of getting these tasks accomplished, but these days, this can all be done online—in some cases, from a smartphone. The reason why it's so critical for lenders to know, understand, and accept this shift in consumer behavior is because it affects the way that you stay competitive to gain new customers and communicate with existing customers.
If, for example, you're only using traditional forms of communication—i.e. sending letters—to contact borrowers that have lapsed or inadequate auto insurance coverage, you could be decreasing your response rates and placing a greater administrative burden on your staff. While letters are required by law for tracking programs, they generally do not translate into action on the part of the consumer. Voice messages, such as automated messaging, actually result in a higher likelihood of response. In fact, our own internal research shows that automated messaging reduces the average number of first letters to a borrower by 10-15%. Consumers simply prefer and respond more consistently to electronic communication.
If you haven't already done these, here are five smart ways that you can transform the way you communicate with your borrowers:
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Implement an Interactive Voice Response (IVR) system—even if you only use it during non-business hours
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Make sure your website and home banking channels use responsive design so that they can be viewed easily on all devices
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Offer electronic statements
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Offer email alerts and push notifications for loan payments
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Use automated messaging in your insurance tracking program
Keeping with the pace and lifestyle of your borrowers is not always easy—it seems like as soon as businesses and financial institutions adopt one form of technology, a new one is introduced and adopted by the masses! However, it is a critical aspect of staying relevant, engaging, and valuable to your customers.
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