How To Improve The Customer Experience Through Digital Transformation In The Lending Industry

Customer experience (CX) is critical to any business. In 2020, around 27% of brands improved CX quality, 13% higher than in 2019, according to consumer surveys by Forrester. Back then, companies focused on finding and eliminating problems, including internal processes. But 2020 changed everything, forcing businesses to rethink the core competencies of customer experience.

Now, low rates, especially when it comes to lending, are not enough for banks to attract clients or, more importantly, retain them. Based on my experience talking with banking experts, the modern client values ​​CX more than all the other benefits combined. In the modern financial industry, banks have to personalize their customer journey at all stages, and that includes every step from initial interaction to onboarding to loan origination and more.

So, how can businesses successfully transform their CX to get results? Let’s take a look.

What’s The Connection Between Digital Transformation And Customer Experience?

Customer retention is a key goal for banks — after all, retaining a client is generally cheaper than acquiring a new one — and digital transformation is an effective way to achieve it. Using outdated technologies, a bank cannot provide high-quality remote services, so clients go to more progressive competitors that meet their needs.

According to McKinsey, CX focus and digital transformation practices drive customer satisfaction up to 30% and revenue up to 50%, making the connection between digital transformation and customer experience inseparable.

But not all banks can manage digital transformation seamlessly. Building a foundation for the implementation of a loan servicing strategy and creating a workable system with seamless CX that delivers can prove challenging. So, then what can businesses do when faced with the obstacles of usability and practicality?

Impact Of Digital Transformation On Experience Throughout The Customer Journey 

In my experience working with financial institutions, there are three main milestones at which digital transformation needs to happen to impact the customer journey in a positive way.

1. First interaction: This is the first encounter the client has with the bank. If you take the lending process, for example, to objectively assess all the risks and benefits of issuing a loan, the bank asks the client a lot of questions and requires documentary confirmation of the answers.

To adhere to strict know-your-customer (KYC) and anti-money laundering (AML) regulations, it’s vital a bank is vigilant. So how can lenders, in this case, combine accuracy and customer service? 

Digitalization. This can provide a quality customer onboarding experience overall. Banks looking to improve CX during the first interaction should consider digitalization in the following areas:

• Collecting data and documents in electronic format.
• Checking the correctness of filled-out applications, scanning images and stamps, and recognizing the fields with personal data.
• Selecting loan conditions using a matrix of proposals and a 360-degree view of the client.

2. Communication: At this stage, the bank shows the client that it will be able to communicate with them easily and without delay, whether to resolve an issue or simply complete onboarding.

During the pandemic, online and mobile banking became a necessity. In the first months, their usage increased by 20-50% in many countries.

Experts predict that mobile experience will only grow in popularity, as more than 70% of customers require multi-channel interaction with their bank. In terms of credit, banks can no longer rely only on favorable terms to win clients. Even if it has the lowest rates on the market but cannot provide a decent mobile experience, it reduces its chances of success.

Developing a convenient mobile bank that truly answers consumer needs is always a challenge. But for financial businesses seeking to undergo digital transformation, it’s vital to consider how CX will work as part of their overall transformation strategy and integrate it in a way that fits that strategy.

3. Personalization: According to Capco, experience personalization in financial services is a key factor for 72% of surveyed consumers. Millennials (79%) as well as other generations such as Z, X and boomers (75%, 74% and 58%, respectively) are interested in having services tailored to their needs.

When integrating personalization into your CX, you don’t have to get too complicated. This can be as simple as transforming a spam-like email, “You have a loan pre-approved for ...” into a point of connection. Not only does this ensure your emails get read, you can acquire real-life clients. But how exactly?

Experience personalization in lending involves working with a client from the first contact to tracking the situation and proposing new services:

• Assessing clients’ needs based on a 360-degree view, big data and event history.
• Cross-selling and additional sales of products clients find interesting using convenient communication channels.
• Managing pricing based on purchasing power and customer behavior.
• Drawing up predictive models for loans and responding to non-standard behavior with AI.
• Integrating with third-party data providers to analyze the benefits and risks of loan portfolios.

The bank can combine two personalization modes: proactive and reactive. In the first case, the platform periodically determines what else can be offered to the client. In the second, the bank hears the signals and reacts to them automatically. It facilitates targeted and personalized communication and builds responsible pre-approval, this personalized approach makes the client feel valued.

A Bank’s Most Valuable Portfolio: Its Clients

By digitally transforming the customer experience from beginning to end, a bank can become more aware of where its clients are and what services they are interested in. It can contact them at the right time and personalize offers.

Such an approach to retention is often quite profitable: Revenue can grow by up to 80% over 18-24 months, meaning each client has a tangible value to the bank. By developing digital banking, you can potentially expand your business, likely increase the number of customers who will stay with you and help ensure your business is profitable long-term.