The lenders’ balancing act
It’s never been easy to get consumer lending right. In addition to the competition that exists in any financial services segment, providers must battle changing economic and consumer realities, find ways to grow profits while tempering market opportunities with regulatory practicality.
In the last few years, the onslaught of mobile telephony and digital services has created a further dynamic for the industry. Markets are opening up in size and territorial terms, but also thanks to new protocols and standards. Tapping into the new digital banking opportunity requires financial services providers to rethink their operational backbone.
The regulatory environment is a constant referencing point for the management teams of lenders. It’s never far away from conversations, and it influences everything they do. The Financial Conduct Authority (FCA) is HM Government’s prime regulatory lever. The operating principles they determine and enforce is shaping the UK financial services industry to be a global leader. Chief among these principles is Principle 6; a fundamental steer on how financial services providers should act, to protect the interests of consumers by quite simply ‘doing the right thing’ every day.
Embracing Principle 6 by design
Perceptions of how governance should operate vary across industries and disciplines. The term governance originates from the Latin word Kybernan which means ‘to steer.’ Hence, the origins of governance suggest a preparatory intervention to shape thinking and steer actions, rather than something that ‘corrects’ decisions and acts once they’ve been made.
Adopting ‘Principle 6 by Design’ means repeatedly influencing business decisions on strategy, marketing, process design, and data management in light of how each will impact on the customer.
Personalised onboarding journeys and Principle 6
There can be no doubt that where Principle 6 really bites into operational behaviours most is onboarding of new customers. When prospective customers approach a lender, the steady stream of questions they encounter can either enrich a customer experience, or increase risks to the vulnerable.
For this reason, digital onboarding platforms like PrinSIX today offer lenders the means to curate highly intuitive and personalised questioning scripts that lessen the number of steps in onboarding to the minimum, whilst exposing customer needs, financial wellbeing and levels of vulnerability. In this way, lenders can set the right balance, time and again, between commercial lending opportunity and the efficacy of lending to customer cohorts that the industry (and its regulator) would deem to be vulnerable.
Continuous testing leads to continuous improvement
With new banking instruments like open banking data exposing more insights on customer financial status and health, there are broader opportunities for digital onboarding systems to offer a step change improvement to both customer experiences and their protection from the worst consequences of over extending their financial arrangements. The secret is continuous testing: to iteratively measure impact of changes made at every step of the onboarding journey for each and every cohort. Due to the paucity of information this activity entails, only digital technology can achieve this economically.
Democratising the design of lending journeys
Inevitably, when journeys (perfected by testing) are personalised down to smaller and smaller cohorts of customer group, and require near-constant iteration, another challenge faces lenders: how to orchestrate those journeys when traditional tooling and methods have dictated the application of expert IT resources.
PrinSIX’s digital onboarding platform addresses this challenge by translating workflows through a visual editor into something non-technical people can understand. Putting lending journey design into the hands of business people who have a firm grasp of how lending works and the constant impacts of getting journeys wrong—in terms of impact on sales, lowered customer experience and risks to the vulnerable—makes sense. In a talent market-place short on IT skills, it’s also necessary for most lenders.
Summary and checklist
There is a strong argument that the regulatory environment of the UK has forced the industry to ‘do better’ when it comes to treating customers fairly, although many inside the industry would argue that desire has always been there. What has been missing are the tech tools to turn those ambitions into actions.
Principle 6 has created better outcomes and protections for consumers, but it’s also created global leadership in the UK FinTech industry, with technology and process coming together in smarter ways to solve these problems—and it’s happening ‘further and faster’ here in the UK.
Our recommended checklist to adopt Principle 6 by Design goes as follows:
- Adopt an all-digital approach to customer engagement and onboarding
- Install iterative testing and validation of changes to onboarding journeys
- Ensure that onboarding platforms can ‘fine-grain’ journeys to smaller cohorts of customer to better tune to circumstances and needs
- Before investing in IT, make sure it offers the integration dexterity to embrace third-party repositories and platforms (including but not limited to Open Banking)
- Democratise journey design and iteration to place it in the hands of lending practitioners
- Embrace chatbot technologies that boost customer empowerment and serve up a 24/7 delivery capability
- Audit data security, privacy and operational hygiene factors of any digital platforms you invest in
About the Author
Ian Tomlin is a management consultant and writer on the subject of enterprise computing and organizational design. He serves on the USTECH GLOBAL European Management Team. Ian has written several books on the subject of digital transformation, cloud computing, social operating systems, codeless applications development, business intelligence, data science, office security, customer data platforms, vendor management systems, Managed Service Provisioning (MSP), customer experience, and organizational design. He can be reached via LinkedIn or Twitter.
PrinSIX transforms digital customer journeys in regulated and risk environments by offering a fully flexible solution to orchestrate UX, communications, internal and third-party data sources, and third-party applications to optimise business’s commercial and risk objectives. The platform combines digital and analytical technologies to allow the creation of hyper-personalised customer journeys without the need for IT development or maintenance.
Optimise digital onboarding by simplifying journeys, transforming understanding and accelerating improvement – achieving the optimal balance between Acquisition Cost and Lending Risk.
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