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The value of delivering education through consumer lending services

Mar 13, 2017 Walt Wojciechowski

The value of delivering education through consumer lending services

Loan officers and other personnel on the front lines of your consumer lending services often engage individuals who are new to the whole process. There's always going to be those first-time homebuyers or young adults who are trying to finance their first cars. 

In light of the fact that your lending department interacts with inexperienced consumers from time to time, it's worth assessing the value of integrating educational modules into your consumer lending practices. 

The challenge of engaging consumers

One of the challenges financial institutions (FIs) face today is how consumers view their relationships with such businesses. According to research from Accenture, most consumers (79 percent) believe the primary purpose of engaging a bank is to handle transactions such as making deposits. Only 21 percent of consumers visit banks to receive advice on how to improve their financial well being.

What this means is that consumers may relegate banks and other FIs to handling bill payments and checking account statements. Such services don't provide a great return. In contrast, lines of credit and other lending products generate more revenue.

With respect to this issue, FIs need to deliver targeted messaging to consumers who only engage them for transactional needs. This might entail sending an email educating a particular individual about your investment and lending services. That's an example of educational marketing. However, refrain from sending email blasts to those who have not indicated they would be interested in lending products and services.

Borrowers want clear, helpful advice

From a consumer's perspective, lending can get pretty complicated, especially without a credit history. For credit invisibles, loans may be unfamiliar territory, making them unsure of how to navigate the financial landscape. 

Education provides clarity. While you don't want to overwhelm borrowers with information, you should endow them with the knowledge necessary to feel they're in control of the relationship.

PricewaterhouseCoopers discovered consumers favor FIs that deliver quick and simple services. Complication and a lack of knowledge can get in the way of setting up loans, investment accounts and other high-revenue services efficiently. Education can eradicate those problems. 

How to integrate education into consumer lending 

While there are many tactics your institution could employ to educate consumers throughout the lending process, here are three which stick out as particularly effective:

  • Blogging: This is a top-of-funnel tactic through which you can explain how the lending process works, what consumers need to do to prepare for loans, and other rudimentary information that allows people to familiarize themselves with your services.
  • Asking questions: When an applicant sits down with a loan officer, is the latter asking questions that reveals how much or how little the prospect knows? Keep explanations of complex issues as concise as possible. If helpful, draw visuals on a whiteboard to better illustrate the point.
  • Deploy online/mobile managers: In the post-application process, ensure the borrower has access to online and mobile tools that help them set payment reminders, receive advice on how to save up for payments and learn about the advantages of making principal payments. 

Each of these tactics enable you to impart knowledge on both experienced consumers and those with little to no credit history. Speak with operations, marketing and your loan officers to figure out how you can implement these steps.