Why Now Is the Time to Accept Debit Cards in Mortgage
Are you part of the mortgage servicing transformation? While letting customers make payments with a pair of sleek sunglasses is a novelty, there are still plenty of sensible mortgage servicing options your customers want.
Mortgage servicing lags other loans
Mortgage servicing is lagging behind auto, and credit card lenders use of electronic payment options like debit cards. Customers make more than 20 percent of their auto and credit card loan payments with a debit card, while mortgage only gets 5 percent of payments with debit cards.
28% Of Auto Loans Paid by Debit Card
21% Of Credit Card Loans Paid by Debit Card
5% Of Mortgage Loans Paid by Debit Card
Millennials make 21 percent of mortgage payments with debit card
Now that 80 percent of customers have stopped carrying around their checkbooks, debit cards have become their preferred way to pay, and one that they expect to use for nearly every purchase or payment. As more millennials purchase homes, we expect this mortgage servicing trend to intensify. In fact, Millennials paid $100 billion to mortgage servicers last year and made 21% of mortgage payments with a debit card.
Removing Payment Barriers from Mortgage Collections
Customers in the habit of paying with their debit card are more likely to pay on time, especially if they can pay online any time they choose. Don’t underestimate convenience as motivation. If your loan is the one bill they can’t pay that way, they’re more likely to pay other bills first and put yours aside for later.
Encouraging new borrowers to pay online is a good idea, especially when you consider increased on-time payments and reduced costs for customer service and collections.
Common payment scenarios that lengthen the collections cycle:
- Customer is ready to pay, but doesn’t have ACH information available during collections call. Payment is delayed and could require multiple calls to resolve. Customers willing to pay with a debit card are frustrated when you explain that your mortgage payment solution won’t accept it. The account remains in collection.
- Customer doesn’t have a checking account with you, but they promise to schedule payment through their bank’s bill payment system. This isn’t much better than promising a check payment. You still have to wait, and collections activity continues—which decreases customer satisfaction. Customer will tie up representatives on the phone, trying to confirm payment, and when payment does arrive, it could still generate exceptions.
- Customer hates dealing with collections reps and won’t respond to repeated phone communication. By enabling online or IVR debit card payments, you let customers avoid interaction with collections staff. This also lets them pay any time, day or night, removing another payment barrier.
- Borrower’s family or friends want to help resolve the delinquency. They don’t have an account with you, and they don’t want to initiate ACH payments. Debit cards are the fastest, most convenient way to bring the account up-to-date.
When a top 25 bank chose this approach for loan payments, it experienced a double digit increase in payments on delinquent accounts. Now, the bank’s delinquent customers receive a call from an IVR system that accepts payment with zero customer service interaction.
Once barriers were removed, the percentage of on-time payments also increased.
Eliminating Payment Exceptions
Accepting debit card payments can drastically reduce the number of payment exceptions being processed by your cashiering department.
When customers pay with debit cards online, their accounts can be validated in real time, eliminating exceptions generated by incorrect account numbers, insufficient funds or missing payment coupons.
Make it Easy for Your Customers to Pay
Many mortgage customers prefer quick payment options that don’t require logins and passwords. Fifty percent more customers pay their loans directly to the mortgage servicer than with online banking. Making the experience frictionless by allowing quick access to pay online or with an agent over the phone is key to increasing adoption.
Since online payments cost less for you as the servicer, you may want to employ a few strategies to encourage online payment adoption at your site.
Easier, Quicker Phone Payments
While customers enjoy the ease of online debit card payments, you can improve the performance of your call center by making debit cards an option. Plus, self-service IVR payments give customers yet another channel to interact with you and make payment.
Search Engine Optimization
Optimize your website with phrases customers generally use when they want to make online loan payments. Make it easy for those who are ready to pay to seamlessly navigate to your online payments page.
Ease of Implementation
The most beneficial payment solutions for mortgage servicers are designed with ease of use as a priority. Easy to implement, they can be integrated with many core systems, including Black Knight.
Industry trends are clear. As debit card usage continues to rise, customers expect to use them to pay nearly every bill. Make it as convenient as possible for them to do so while reducing your call center volume, collections costs and exceptions processing.
Federal Reserve Payment Study and Onovate Consumer Survey
All other data from Aite Group’s How Americans Pay Bills Survey
Related Blog Posts
European Banks Have the Right Tools to Stay Ahead – But Will Big Tech Overtake?
Open banking and immediate payments have come a long way, according to the panellists who joined me during the ‘Open Banking in an Instant World’ session at EBAday in Stockholm recently. The building blocks are now falling into place through the introduction of national and regional schemes, open banking initiatives, regulations such as PSD2 and the acceptance and use of APIs.
Checkout Optimization Challenges: Top Tips for Online Merchants
As the current conference season draws to a close, it’s time to reflect on one of the key topics topping the agenda for many online merchants: checkout optimization.
How Banks and Acquirers Can Deliver on the Benefits of PSD2 SCA Exemptions and Differentiate Their Merchant Services
PSD2 is an opportunity for acquirers to differentiate themselves by delivering improved services to their merchants, if they implement modern solutions to manage SCA exemptions. This will drive the best customer experience in combination with regulatory compliance.
How UPI is Driving India's Shift from Cash to Digital Payments
The Indian economy has traditionally been heavily dominated by cash, while experiencing low adoption of various online payment systems including National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and inter-bank mobile payments. The dominance of cash is evidenced by the ratio of cash withdrawals at ATMs vs debit card usage at Point of Sale (POS)—ATM transaction volume is more than 2x greater than POS.
Cooperation, Consultation and Collaboration Are the Keys to Countering CNP Fraud in Australia
As Europe, and other parts of the world ramp up for regulatory changes around PSD2, Australia is about to launch its own strategy to combat Card Not Present (CNP) fraud.
PSD2 and Strong Customer Authentication – What's in Store for Merchants?
With the final pieces of the Payment Services Directive (PSD2) puzzle coming together, payments businesses are highly focused on meeting their compliance obligations. But the forthcoming changes will affect everyone in the payments chain – and it’s important for merchants and PSPs to understand the practical implications for their businesses and customer relationships.
Transforming Telecom Companies in a Retail World
The recent MVNO World Congress in Amsterdam brought fascinating insights into the changing telecom industry, particularly around the opportunities that lie ahead for Mobile Virtual Network Operators (MVNOs) and how they can they can cement their position in today’s fast-paced climate.
Success Speaks: Surprising New Ways Students Want to Pay
Colleges and universities are facing the dual tasks of accommodating not only new payment methods, but also a new generation of students, Gen Z, whose expectations differ greatly from even millennials. How can higher education institutions meet these demands?
In our latest Success Speaks webinar, experts from Temple University, FutureCast, ACI and MTFX Group of Companies explored today’s payments landscape for colleges and universities, payment desires of Gen Z, innovations the higher education sector is already implementing and how schools can better assist with international payments.
Women Must Choose to Rise Up Despite Past, Current and Future Circumstances
Money20/20, Europe’s biggest payments and fintech event, was recently held in Amsterdam and featured Rise Up Money20/20, a global program designed to address the gender imbalance in leadership positions within the financial services and fintech industries. A cohort of 30 female professionals was selected to take part in an exclusive curated agenda, complete with a series of bespoke content sessions, one-to-one mentoring and unique networking opportunities.
Beyond Borders: Navigating the Challenges of eCommerce Expansion
eCommerce continues to flourish, with impressive growth figures year after year. In 2018, global online sales reached almost $3 trillion, and are expected to hit $4 trillion by the end of 2020.
Despite eCommerce taking an increasing slice of the retail pie (which could now be as high as 15 percent according to recent figures), it is increasingly challenging, with competition and cost pressures creating significant issues for merchants of all sizes.