9 Surprising Loan Servicing Trends


Thursday, March 16, 2017
Posted by Marc Sczesnak to Payments and Industry Trends, Bill Pay
Share this:
“Think like customers, not like lenders” was my motto during my 30 years as a lender. But it’s getting tough. Customers are changing faster than ever.
We recently worked with Aite Group on an extensive study to learn more about how customers view and pay their loans. The billing and payment experience is the top driver of loan servicing satisfaction. So focusing here will create more smiling customers.
We learned that one VP increased customer satisfaction by 50 percent through enhancing his company’s billing and payment experience*. Could 2017 be your year to make big jumps in customer satisfaction?
To make happy customers, align your business with these nine trends.
-
Customers now use 18 different ways to pay loans
Customers want more choices. The McLaren coupe 570s comes in 20 different colors. Americans own 20 pairs of shoes. The number of TV channels in the average American home grew 50 percent to 189 channels.
“Have it your way” applies not only to colors of cars, shoes and TVs. But also to how customers pay the loans they used to get those cars, shoes and TVs.
Customers expect these choices when they pay you:
- Timing options: one-time and recurring payments
- Channel options: mobile, web, phone, mail, walk-in payments
- Funding sources: debit card, ACH, cash, check, money order payments
Customers are voting with their thumbs and mouse clicks. They increasingly want to pay you at your website from their mobile phone and computer. By 2019, customers are expected to pay 57 percent of loans at your website (average of all types of loans).
To get your business case approved, put the customer at the very center. But don’t take my word for it, read Capital One’s Business Case for Accepting Debit Card Payments. -
Generations make a big difference in loan servicing
On average, Millennials spend 54 hours per year taking selfies. That’s significantly more than the other generations. Generational differences create longer lines at Niagara Falls due to all the selfies. Age differences will also determine which lenders survive.
Every other generation is decreasing in number, but Millennials are growing.
To better serve and understand Millennials, we must step into their shoes. So pull out your smartphone, snap a selfie and then go to your website. View your bill and try to pay with a debit card. What’s your experience like? -
61 percent of loan statements are now delivered electronically
We’re entering into a new phase of customer communication. Personalization, interactivity and ‘anywhere access’ are king. Now we tell our phones “Ok Google, get me directions to the nearest golf course.” Then Google will tell us “you will arrive in 10 minutes but the course doesn’t open for another 30 minutes.”
Customers also expect personal and interactive messages from you. As customers use electronic statements more, they also expect more features. Now it’s time to add one-to-one marketing messages and videos.
As we just saw, you must serve a wide variety of customers. Raise loan servicing satisfaction with one-to-one messaging in loan statements. Imagine the possible messages you could send:
- “You’re 30 days delinquent, click here for a personalized payment plan”
- “You will pay off your car loan next month, click here to see next year’s models”
- “Homes in your area appreciated 10 percent last year, click for home equity loan rates”
Three out of every four loan statements are expected to be electronic only by 2019 (average of all loan types). Lenders will turn higher digital engagement into higher profits by adding personalized marketing offers in electronic statements.
Tip: delivering personalized messages requires data stored in many different systems. Use an eBilling system that integrates the output from all your systems. This saves you from having to integrate your systems. -
eBilling system fail: lots of customers receive both paper and electronic bills
22 percent of customers receive both an electronic and paper loan statement. This could make you pay for sending two bills each month. If your electronic bill does not give more value than paper, why would customers switch to paperless?
To satisfy customers while saving on postage, upgrade your eBilling system with
- Video and audio messages
- Text and email reminders the bill is due
- eBills designed for smartphones, tablets and laptops
Millennials are more likely than other generations to receive both paper and electronic bills. If we don’t move fast, Millennials could become set in their ways and inflate your costs for years. -
35 percent more customers pay with a debit card than check
Change happens fast. A mobile app that takes disappearing pictures got a $20+ billion valuation. That’s a higher valuation than Keybank, Fifth Third Bank and Ally Financial. 150 million people use Snapchat each day to send disappearing pictures of their new car, home improvements or fun with friends from school.
Radical change also came to how customers pay for their car, home and schooling. Now 35 percent more customers pay their loans with debit cards rather than checks.
Customer behavior has really shifted.
This is easy to see in the story of a lender who five years ago received more payments via ACH than debit card. But Americans started desiring greater convenience. Debit cards have since grown at a 37 percent CAGR. Debit cards now account for over 80 percent of electronic payments at this lender.
Read how this lender won over customers with easy payment options. -
Customers like recurring card payments
It’s March, so most people have abandoned their new year’s resolutions to go to the gym. But many keep paying their gym fees because they put their payment on “set it and forget it.” Imagine if customers use recurring payments for things they actually use like their car, home and credit card.
Customers like the ease of recurring card payments. In fact, 13 percent of wireless bills are paid automatically with a card. Lenders have been slower than wireless companies to accept automatic card payments due to cost concerns.
But customers reward lenders with 50 percent lower delinquency rates for recurring payments.
Lenders are beginning to recognize customers’ desire to set up recurring card payments. 4 percent of loans today are made with a recurring card. -
80 percent of customers paying over the phone would switch to online payments
Our consumer survey found you can make customers happy while shifting them to lower cost behavior. Just make these four changes to your online bill pay service.
What will motivate customers to switch from phone to online loan payments?
- Getting an immediate online confirmation of payment
- Ability to pay with a debit card online
- Eliminating/reducing fee for paying with a debit card online
- eBill delivered via email with link to online payment
-
Convenience costs less
Poor communication prevents many customers from using cheaper billing and payment methods. 21 percent of customers who pay over the phone would pay online if they knew they could. 22 percent of phone customers would pay online if you emailed them a reminder to pay at your website.
The COO at one lender made customers smile with easy recurring and one-time payments. They used a multi-channel marketing campaign to promote their new options, and the combination of new payment options and marketing worked. They shifted 10 percent of call center payments to self-service in one year.
Read their loan servicing success story. -
One lender increased satisfaction by 50 percent with a new loan payment solution
Incorporating these insights into your loan servicing strategy can boost your profits. You’ll make happier customers, reduce complaints and save money.
A VP recently told us how they raised customer satisfaction 50 percent*. To make happy customers, they launched a new loan payment solution with:
- Debit card and ACH payment processing
- Mobile, web, interactive voice response and call center bill payment options
- Tight integration with their loan servicing software to reduce call center time
Making it easier for customers to pay also increased dollars collected by 10 percent.
*Results from the 2016 TechValidate survey entitled “Bill Payment Solution”
Related Blog Posts
What Will the World of Post-Pandemic Payments Look Like? [Dave Birch Q&A]
Dave Birch is a leading global authority on payments and digital identity, who is no stranger to predicting what the future of financial services has in store. After delivering the keynote presentation at our recent ACI Edge Virtual: Banks & Intermediaries, we gathered some insights from Dave on what the world of payments could look like, post pandemic.
The Rise of “Invisible Payments” in Latin America
For retailers throughout LATAM (and the world), driving sales and loyalty depends on keeping up with top payment trends, which are invariably driven by consumer demands. “Invisible payments” is an emerging trend that is already paying benefits for a host of retailers — and it could be a game-changer for Latin America.
Digital Payments in India: Delving into Diwali Festive Season Spending [Q&A]
While many retailers around the world have just entered their busiest period of the year – kicking off in earnest with U.S. Thanksgiving and the increasingly global phenomena of Black Friday and Cyber Monday – there are some markets where these busiest of periods have already occurred. An extended China Singles Day raked in roughly $100 billion at the start of November, while India’s festive season, culminating with Diwali in mid-November, was widely expected to witness strong growth of online sales in particular.
Do Merchants Have the Right Tools to Tune Their Engines for the Innovation Race?
2020 has been a year of many, many changes, across nearly all walks of life and business. One beacon of light is that these circumstances have pressed the digital acceleration button, in some cases advancing digital uptake and innovation by years, within a matter of a few months.
Confronting Disruptive Pressures in Issuing [Customer Q&A]
We are at the dawn of an industry overhaul. The banking industry is facing disruptive pressures on multiple fronts, but particularly in payments. More competition, increasing regulation, and growing consumer expectations, payment types and channels. Plus, for issuers, there is the additional challenge of remaining relevant and at the center of the customer relationship, which has never been more complex.
Strong Customer Authentication: New Rules Will Trigger Profound Changes in Many Organizations [Q&A]
One of the biggest industry issues for the payments community right now is strong customer authentication (SCA) – the new regulation for card payments, including card-not-present or eCommerce payments. This is due to come into force on December 31, 2020 in the EU, and on September 14, 2021 in the U.K. ACI recently brought together industry stakeholders for a webinar entitled Competition Versus Compliance: How an SCA Exemptions Strategy Can Grow Your Business. I spoke with these stakeholders about the challenges, but also opportunities, that SCA will bring to the payments industry.
The Two Sides of Payments Modernization in Asia: Real-Time and Financial Inclusion
Home to nearly 60 percent of the world’s population, as well as some of the most dynamic and diverse markets, the Asia-Pacific (APAC) region plays a critical role in shaping the world economy. The diversity of the region is also evident in its payments landscape, with almost every country forging its own path towards payments modernization.
The Fight for Fuel Customer Loyalty Is On
In 2019, price determined where 59 percent of consumers chose to purchase their fuel, and more than half opted to pay at the pump, preferring to simply pay for gas and go.
Payments Modernization in the Cloud: An Inflection Point in the History of Payments
Public cloud is one of the big buzzwords in payments right now. While a few years ago financial institutions were reluctant to embrace the technology, they are now among the most likely to do so. ACI discussed the topic of Payments Modernization in the Cloud during a recent webinar, moderated by Finextra’s Head of Research Gary Wright. Katrin Boettger caught up with the panellists — Ciaran Chu, head of cloud at ACI; Peter Hazou, business strategy leader at Microsoft and Lu Zurawski, practice lead, retail banking at ACI — about why the COVID-19 pandemic might be a further catalyst for the worldwide adoption of cloud technology.
From "Access to Cash" to "Access to Digital" – How Innovative Thinking Is Keeping SMEs Trading
With millions of people in London and the wider U.K. having endured lockdowns and restrictions, the COVID-19 pandemic has had a massive impact on our shopping habits. While some supermarkets have struggled to keep up with customer demand and social distancing rules, many small, local business have adapted to the crisis quickly, efficiently and in innovative ways. While supermarkets have run out of delivery slots, smaller businesses are now offering local deliveries whilst providing safe digital payments options. They are also selling goods that the big supermarkets have run out of because traditional supply chains have been interrupted.