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How Lenders and Consumers Are Going Digital

Liz Pagel

The role of technology across all industries has become increasingly important since COVID-19 forced the implementation of stay-at-home orders and a broader adoption of work-from-home options. Lenders have had to adapt quickly by making the lending process more accessible to consumers online.

Liz Pagel, SVP and leader of the Consumer Lending line of business within the Financial Services Vertical at TransUnion, is responsible for the strategy and market development activities that support lenders offering unsecured personal loans. She answered questions for MReport about how lenders and consumers are pivoting to digital communications and coping with the pandemic.

How has the pandemic changed consumers' needs?

Beginning from the very early days of lockdown and in-person interactions being shut down, almost completely in many geographies, consumers have had to shift to doing a lot of their financial service interactions online. There was a huge portion of the population who still used bank branches for all of their needs, and a lot of loans were underwritten almost entirely in person.

So, with the pandemic coming into play, consumers had to be able to do those transactions online, and they shifted faster than I ever believed possible. Lenders pivoted very quickly to allow them to transact online, and consumers switched as well. And those interactions are now kind of all happening online, a transition that we expected to take years and years, happened in a matter of months. So, a lot of originating loans online, and a lot of making payments online, a lot of doing all of those things and not in person.

The other thing that has happened similarly is consumers are doing a lot of their shopping online. And that created an opening for a market that was just beginning to grow, which is point-of-sale financing, which is when you're about ready to put something into your shopping basket online, or you're about ready to check out, you get an offer, or there's an option to finance that purchase over a number of payments. That market was beginning to gain steam right before the pandemic. And as all the consumers moved their shopping online, this just grew even faster.

What digital trends are consumers adopting right now?

This point-of-sale lending is probably the biggest thing I would point to, which would be, again, financing the purchase at the point of sale, right then and there, through the merchant's website. That has kind of taken off. And then at the same time, doing more of their loan origination and banking services online, I think would be the biggest things that are happening digitally.

What have lenders already done, and what can they continue to do moving forward to stay competitive, tech-savvy, and engaged with consumers?

What impressed me early on, is that lenders really did a great job reaching out to consumers who had credit with them to make sure that they were okay. There were a lot of job losses, a lot of underemployment, unemployment throughout this crisis. And lenders have been very willing to reach out directly to their consumers to say, "Hey, we know this is a tough time. Call us, let us know if you maybe need to skip a couple of payments if you'd like to go into forbearance so your credit is not impacted by this pandemic."

And reaching out and really being there for consumers is something I saw from lenders across the credit spectrum. So it's been not those that just had big lines of credit out to people with high credit scores, but all the way into deep subprime, those lenders were really staying in contact with their consumers. And they're continuing to do it today, reaching out, just letting consumers know that there're options.

And that has really helped them, especially with building loyalty from customers. Customers really remember when a lender was there for them and helped them through a tough time. So I think that that's going to pay off in the end for these lenders.

Other things that they've done is, like I said, moving their interactions with consumers online. And at the same time, when you're doing that, you have to really protect against fraud, and help the consumer make sure that they feel safe in transacting online. So there's almost a right level of friction in originating a loan or doing a transaction online with...  a consumer doesn't want to be put through 10 different levels of authentication, but they do want a little bit of authentication, so they feel safe and they know that no one else could be taking out this credit in their names.

So, really getting that right has been a big focus for lenders. And those that can get just the right amount of authentication, and then a fast automated underwriting process, I think are going to continue to win.

You mentioned protecting customer's data. Are there any other solutions to protecting this kind of data that lenders are doing now?

Yeah, there's a lot. I could probably talk about that all day. There's a lot more. So we have seen a lot of identity theft spiking up during this crisis, and so there's a lot more emphasis on tools of identity and device authentication.

So, when a consumer is transacting online, you want to first really identify that that person is who they say they are, but also we can check the risk of the device the consumer is using. So TransUnion has tools that allow a lender, or a financial institution, to check that the device that the consumer is interacting with them on has not been associated with other known frauds. So a lot of fraud rings will all come from the same laptop, or the same cell phone, that's just creating new IP addresses each time and reaching out trying to perpetrate fraud.

A lot of tools are becoming more and more important to ensure that this device has not been associated with fraud in the past several years. Or even in the past several minutes, sometimes things happen that fast.

What are some new credit education tools available to consumers?

There is a lot out there. I know TransUnion has a whole consumer-facing website through transunion.com where you can go in, sign up, see your credit. And you can even model what would happen to your credit if you were to pay off your credit card balance if you were to take out a new credit card, if you were to pay off your mortgage, if you were to take out a mortgage. You can actually play with different scenarios and it would show you what that would do to your score. And I know a lot of consumers use that, if they have a goal maybe a year or two years in the future, to buy a car, or buy a home. They can plan out what they need to do to improve their credit to meet their goals.

How do you think the pandemic will impact the relationship between lenders and technology in the long-term?

I expect that the progress that's been made in terms of allowing consumers to transact online, and making them feel comfortable doing so, I don't think that's going to go back. Consumers who had never made a deposit, or taken out a credit product online, who've done it during the pandemic, I doubt that they'll go back for a similar transaction to the branch.

I think more and more banking is going to be done online. And that consumers are going to get more used to some of those fraud protections that are necessary. So knowing that they may need to receive a one-time passcode to their device before they get in, knowing that they may need to provide access to their bank account in order to help the lender see that they still have a job, that they're receiving a paycheck. A lot of those fraud controls that maybe consumers weren't familiar with in the past, they'll become commonplace and they'll get used to it. So I think we've made a tremendous amount of progress in a very short amount of time, into moving into a more digital lending experience.

Is there any other way that you can see lenders kind of optimizing engagement with consumers now that there is less face-to-face?

Yeah, I think so. I think we're heading in a path where offers for credit... Even today, a lot of credit offers are still delivered on paper by mail to consumers. And that's still a very effective way for lenders to market, but I think that this change is probably going to accelerate the shift to digitally delivering credit offers. And trying to find new and unique ways to do that, and to make sure you're targeting the correct consumer, and making sure that offer gets into their hands, but that becomes more and more important in this more digital-first environment.

And then I also think that everything's going to become faster. So, underwriting online is going to need to be automated and smooth for the consumer and that's going to become table stakes.

About Author: Cristin Espinosa

Cristin Espinosa is a reporter for DS News and MReport. She graduated from Southern Methodist University where she worked as an editor and later as a digital media producer for The Daily Campus. She has a broadcast background as well, serving as a producer for SMU-TV. She wrote for the food section during her fellowship at The Dallas Morning News and has also contributed to Advocate Magazine and The Dallas Observer.
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