According to Pablo Sanchez, the regional head of retail banking and wealth management at HSBC, the unsecured personal loan market in the U.S. is increasing by 20% each year. There are millions of consumers who need loans for a variety of reasons including expenses, home improvement, and debt consolidation. By the end of 2020, unsecured personal loans have the potential to reach $156.3 billion by the end of 2020.
Banks that understand the advantages of improving their consumer lending will ultimately reap the benefits of the growing market. OKRs can help banks and financial institutions focus their work on improving their consumer lending process.
- Total Expense of Consumer Lending: This is the total expense incurred by the bank through the Consumer Lending function over a particular period. This includes expense-related to processing, loan origination, and servicing for consumer loans.
- Consumer Loans Closed per Consumer Lending Employee: This can be derived by using the total number of consumer lending employees of the bank to divide the total number of consumer loans closed over a certain period of time.
- Percentage of Consumer Loan Applications Received Through Internet: This can be calculated by using the total number of consumer loan applications received by the bank to divide the total number of consumer loan applications received through the internet at the same point in time as a percentage.
It is possible to measure the growth of a bank’s consumer lending by leveraging the following metrics:
How To Capitalize On Consumer Lending Market
The suggestions below are ways in which your institution can improve its consumer lending and evaluate what should be included in your OKR.
Leverage Artificial Intelligence
According to Emerj, an artificial research intelligence firm, financial technology is rapidly changing and developing. Companies that take advantage of this technology are able to use AI to harness advanced analytics and automate the underwriting process.
AI has the potential to tremendously increase the availability of consumer credit by examining factors that cannot be assessed by traditional metrics. Integrating AI ensures that creditors will be able to make smarter decisions in regard to clients’ loan eligibility.
Take Advantage Of Home Equity
According to TransUnion figures, mortgage applications are dropping fast due to rising interest rates and rising home prices. However, this decline has been a blessing in disguise for home equity lenders. As of the third quarter of 2018, CoreLogic reports states that U.S homeowners with mortgages have had their home equity increase by 9.4% annually. This translates to $775.2 billion that is up for grabs through home equity lending. The same report states that the average homeowner earned a profit of $12,400 in the first three quarters of 2018 in equity. Hence, by finding those who can qualify, you will be able to provide the lowest rate to borrow to your customers.
Sales And Service Training
According to Omega Performance, a financial service organization, it is vital to have employees who can do more than just taking orders from your customers. Train your employees to be confident enough to engage your customers and ask them important questions that can lead to productive outcomes. Your staff should be able to help customers solve their problems by suggesting solutions that the bank has, like personal loans.
Traditional banks are now future-proofing their workforce to compete with new-age digital financial institutions. For instance, DBS Bank invested nearly $14.5 million in a five-year program to upskill its 10,000 Singapore-based employees in digital banking and emerging technologies to help them to thrive in the digital economy and adapt to the future of work. So, your bank shouldn’t lag behind in their workforce training.
Create Win/Win Solutions
While interest rates and revenue are a driving force behind consumer lending, the money shouldn’t detract you from the needs of your clients. Providing clients with ways to increase their credit score or lower their monthly payments will create a trusting relationship between customers and employees. your commitment to their welfare will speak volumes and customers will feel encouraged to recommend your organization.
Offer Free Credit Score Analysis
Another way to ensure that your customers are satisfied is to offer them a free credit score analysis. Giving customers this information will let customers see how their actions are affecting their credit score and show them what they can do to improve it. The more customers you have with good credit scores, the more customers you will have who are qualified for personal loans.
Based on these suggestions, your lending department could develop the objective “Improve Consumer Lending.” As your consumer lending grows, so will your organization’s revenue.
OKRs:
Here is a sample OKR we have created for growing consumer lending.
- KR1: Create SMS/ email alerts for all the identified top 3 abnormal activity of the borrowers
- KR2: Reduce waiting time to less than 5 minutes to speak with a customer service representative
- KR3: Develop workflows to generate pre-programmed notifications when Loan authorization is required
Objective: Improve Consumer Lending
For KR1, the KPI is account alert. Account alerts are an underutilized way to provide exceptional customer service and promote customer satisfaction. Account alerts can be used to encourage borrowers to adopt and be more active in web applications. According to a survey, receiving account alerts via text message, secure messages on the servicer’s website or email was associated with high customer satisfaction.
For KR2, waiting time to interact with the customer service representative is the KPI. To satisfy borrowers, mortgage servicers need to reply quickly. Borrowers expect prompt responses to their inquiries and customer satisfaction drops when borrowers believe their time is being wasted.
For KR3, automation can become part of the lending services. For this, workflows have to be developed to create digital approval hierarchies to generate pre-programmed notifications when authorization is required. To further drive engagement, when notifications go unanswered, alerts are created and can be used to escalate time-sensitive issues. Also, insights from these workflows help identify bottlenecks or individuals impacting processing speed. These insights allow leadership to allocate work based on employees’ strengths or provide additional training to develop necessary skills.
Because of the direct impact that consumer lending has on a financial institution’s overall profit, this OKR could align with a corporate OKR to “Increase Revenue” or “Improve Overall Profitability.”