Alkami Technology Plano Texas

Improving digital loan servicing with intuitive self-service tools

Improving digital loan servicing with intuitive self-service tools

Support account holders with rising demand for credit

Imagine a scenario where you are struggling to get by – your paycheck is simply not enough to cover the rising cost of housing, higher grocery price tags, and the kids just went back to school and need supplies. This is the reality for 61% of Americans who live paycheck to paycheck. Following the pandemic, consumers and businesses still need financial support and feel a heavy burden of debt. In Q2 of 2022, consumer debt totaled $16.15 trillion, a $312 billion increase from the previous quarter (The Financial Brand, 2022).

Today’s consumers face a new challenge – inflation accompanied by higher interest rates and exorbitant cost of living. As consumers and businesses equip themselves to prevail through a potential recession, they turn to their financial institutions (FIs) for support with extended credit and loans. According to The Financial Brand, “one in three Americans who have opened unsecured personal loan relationships have done so to address a shortfall in take-home pay.”

However, 68% of borrowers who depend on a personal loan are not in a better financial position. This stark truth is a clear indication for FIs to step in and address account holders’ needs with self-service tools and financial wellness solutions that can help them build their finances and achieve financial freedom.

The urgent need for consumer lending flexibility

Some FIs may be hesitant to lend to riskier borrowers. However, these customers and members are the families facing enormous financial burdens when paying for basic necessities. Support account holders throughout tumultuous financial cycles with credit line increases and convenience when paying off their loans. 

In an article by The Financial Brand, they found that, “‘the worst thing you can do as a lender is stop originating… Delinquencies will start to increase pretty significantly if you stop lending, because your denominator doesn’t grow. So then you get additional delinquencies on top of a  stagnant or declining base.’” If your FI is not helping borrowers digitally, the risk of attrition grows. Why? Many account holders may feel embarrassed to come in-branch or call in to modify their loan payments. This sentiment may cause them to shop elsewhere and refinance with another lender who has a lower interest rate – and soon the primary FI relationship is up for grabs.

Reimagining the loan servicing experience

While many FIs have launched their digital transformation and introduced online banking, loan servicing has not seen innovation, and consumers want speed and efficiency. Why is loan servicing at the bottom of the FI’s priority list, typically given little investment, and normally the last area for digital transformation? The challenge for many FIs is the heavy burden of manual processes, costly regulatory mistakes, difficulty proactively servicing loans, and the need to prevent fraud.

Through Alkami’s Partner Program, FIs can leverage a digital loan servicing solution that engages borrowers with self-service features which help users better understand, manage, and pay back their loans anytime, anywhere. Now, FIs can deliver faster response times, eliminate human error, and improve payment behaviors.

How can FIs strengthen institutional loyalty and account holder retention? By removing friction and simplifying the repayment experience for borrowers. To exceed consumer expectations, FIs can offer a solution that walks the user through a simple workflow, asking them probing questions about their financial situation, and determining what loan payment option will best suit their needs. It’s time to take a proactive approach to customer service and get borrowers the help they need before the debt becomes overwhelming.

By transforming loan servicing, FIs can exceed their retention and strategic growth goals by:

  • Meeting user expectations for intuitive, convenient experiences
  • Developing time and labor efficiencies for back office teams through task automation
  • Achieving compliance with ease in the ever-changing regulatory landscape
  • Eliminating manual processes and freeing up time for lenders to deliver more personalized service to account holders and drive portfolio growth

Debt is a touchy subject, for good reason. No one wants to admit when they are falling behind on a payment. Meeting account holders in the digital channel allows them to breathe a deep sigh of relief. Remove the anxiety for your customers and members by empowering them with the ability to modify loan payments within your digital banking platform.

Put the power in your account holders’ hands and enable them to define the best case scenario for their lending needs.

Click below to learn more about financial wellness.
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