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Which consumer lending strategies can FIs use to drive growth?

Financial institutions (FIs) are moving from single P&L-centric lending models to holistic ecosystem strategies centered on customer needs.

In brief

  • Data is the greatest asset available in understanding consumer behavior, helping to place the customer at the center of the lending model. 
  • Lenders must think beyond singular transactions to personalized experiences and curated product bundles to meet multiple customer needs. 
  • FIs should break down traditional silos and integrate all aspects of the lending ecosystem to enhance the customer value proposition.

The saying “the only thing constant is change” could be the catchphrase for consumer lending today. Emerging from the COVID-19 pandemic, consumers, having transitioned their banking experiences from brick-and-mortar branches and ATMs to mobile and online channels, expect their lenders to understand and address their evolving financial needs and provide an accessible, seamless and secure digitally enabled lending process. But simply providing digital capabilities is just the minimum entry requirement, as consumers expect lenders to enable convenient, personalized and innovative experiences akin to the ones offered by big tech and FinTech providers.

The transformation of consumer lending allows traditional lenders to benefit from emerging opportunities to deliver effective customer engagement, build loyalty and trust, and drive relevance and growth. As such, financial institutions (FIs) that have successfully met the challenges and captured the benefits of this changing environment are transforming their consumer lending enterprises by focusing on three core principles:

  1. Treating data as their greatest asset in understanding consumer behavior and placing the customer at the center of the lending model
  2. Leveraging technology to deliver a frictionless experience across retail asset classes and channels
  3. Integrating ecosystem partners across the lending lifecycle to curate personalized service bundles and provide holistic value to the customer (i.e., move from singular transactions to experiences that meet multiple customer needs)


Three core principles for transforming consumer lending

Customer centricity, technology and ecosystem partnerships are key to lending transformation.

Placing the customer at the center of the lending model through a data-driven approach

Historically, consumer lending has been an in-person experience that revolved around relationships, but with the pandemic accelerating the use of digital channels, and with customers progressively making lending choices based on their digital experiences, innovative lenders are tailoring products to fit their customer needs by using data to personalize that experience. FIs that use data to anticipate and offer the right products, services and experiences to their customers at the right time can create positive customer experiences, which can encourage loyalty, build trust and advance additional banking needs across the spectrum. 

To derive meaningful insights from customer data and deliver real-time offers and services, lenders need to understand the customer from every angle — by aggregating customer data through continuous event streams of transactions and interactions — and home in on signals and life events. While adhering to regulatory and consumer privacy requirements, FIs that break down data and business function silos and work toward establishing a shared customer data repository that is continually enriched can increase transparency and accountability throughout the enterprise. And with every employee on the same page with access to customer data, FIs can shift from offering one-off, compartmentalized lending transactions to offering collective experiences across P&Ls, tailored for each customer.

Gaining and using meaningful insights from customer data

An example of gaining meaningful insights from data and delivering real-time services to customers would be a hotel guest who has stayed at a different property within the same hotel brand. Their desired room type, floor, meal preferences, wake-up times, laundry needs, etc., and any customer reviews on social media from past stays can be stored and made available to the current hotel so that the property can leverage these insights to enhance the guest’s stay. And after the stay, the data is enriched further with any new insights gained.

Leverage technology to deliver hyper-personalized customer experiences 

With a recent EY survey reporting that consumers expect FIs to offer truly customized experiences across channels, products and lines of business, delivering differentiated and hyper-personalized customer experiences requires more than just digitizing and customizing front-end processes. It requires leveraging technology to transform front-, middle- and back-office processes to deliver consistent, streamlined customer engagement through an omnichannel experience, regardless of entry point, across the entire lending lifecycle, as well as driving efficiency and cost optimization throughout the lending process itself.

For example, a few large FIs are working to seamlessly integrate the personal touch of legacy banking with innovative technologies to provide an integrated digital experience for their customers across all lending asset classes (mortgage, unsecured, auto, student, etc.). They’re using advanced analytics and trusted digital assistants (through artificial intelligence) to give customers greater access and information to manage their cash flow, balances and transactions or to pay bills while striving to provide little to no differentiation between in-person, web-based or the mobile app customer experience.

Other FIs are leveraging technology to drive efficiency throughout the lending process. For example, FIs can automate and streamline data collection wherever possible by obtaining asset, employment and collateral data through trusted application programming interfaces (APIs), eliminating the need to collect it from the borrower. Subsequently, the FIs can validate both data and processing documentation, reducing fraud and operational risk, while enabling them to make more accurate credit decisions and deliver these decisions faster — nearly instantaneous for card and auto products, with significantly reduced cycle times for mortgage and home equity loans.

Integration with ecosystem partners

The third principle involves integrating ecosystem partners across the lending lifecycle and adjacent services supporting the borrower’s homebuying journey to curate personalized service bundles and provide holistic value to the customer beyond singular transactions. Embracing this principle enables earlier and more effective engagement with the customer to potentially help them save and shop for a lending need before they are drawn to competitors and ensures connectivity with the customer long after the initial transaction is completed.

Our research indicates that consumers’ value propositions are built around life events. Home buying is a high-volume, high-value life event that offers lenders the opportunity to proactively address the next set of customer needs with lending solutions and product or service bundles, giving them the ability to capture their customer’s total addressable wallet as well as promote stickiness, increase brand loyalty and build trust. Brands that are able to drive trust through a seamless and holistic experience and curate products based on needs can differentiate and win in the home-buying market.

Different approaches to consumer lending 

The three core principles are being incorporated, to varying degrees, throughout different consumer lending models. And although some consumer lending approaches may be more effective than others, it’s important to note that one size doesn’t fit all when transforming your FI’s lending model to meet your current challenges. Consumer lending can be viewed on a broad spectrum, reflecting changing customer needs and FI capabilities, with lending models ranging from providing simple transactional loans to delivering omnichannel holistic customer experiences. Let us now explore three approaches to consumer lending transformation. 



Consumer lending approach 1: single P&L-centric transformation

FIs focused on vertical consumer lending digitize the process to make it seamless and personalized.

Whether it’s mortgage, credit card, student, unsecured or auto loans, some FIs focused on “vertical” lending model transformations are having success enhancing their individual capabilities by upgrading their legacy platforms and technologies to digitize the product-driven consumer lending process to make it more streamlined, automated and personalized.

Although this approach is effective at improving the asset class in focus, there are some issues in employing this lending model. Data remains transactional and siloed, limiting integration and the ability to obtain enterprise-wide insights that can be used by other parts of the business. And instead of delivering a consistent experience across all lending products, customers may realize completely different experiences when requesting a new credit card versus applying for a student loan, for example. In addition, because processes may vary drastically by loan type, this may result in inefficiencies that are increasingly unwieldly for the FI to maintain. Using this model may also leave money on the table, as loan officers within each business unit are incentivized solely for product sales and growth of their individual units, in contrast to capturing the customer’s total addressable wallet across multiple lending products and business functions.

Two examples of the single P&L-centric transformation approach

An Irish bank, using a single P&L-centric approach to mortgage lending, is increasing lead conversions and transforming mortgage originations by providing omnichannel customer journeys. By supplying online calculators, scenario analysis tools and mobile communication channels, they’ve realized £4 billion in applications in the first 10 months, a 50% reduction in internal processes and calls, and a 75% reduction in application completion time during a 12-month roll out.

Meanwhile, a large Czech bank is bolstering its consumer lending business by teaching its members to manage their finances and achieve prosperity by offering unsecured loans to non-members within 15 minutes. The bank has a fully online channel leveraging robust underwriting mechanisms and innovative credit scoring approaches using internal and external data.



Consumer lending approach 2: cross-P&L transformation

Cross-P&L lending models reduce data, process and customer experience silos across functions.

Other FIs are employing a transformation strategy across retail asset classes to drive consistent experiences regardless of channel, product or service desired, with data, process and customer experience silos reduced between business units, product owners and front-, middle- and back-office functions. These silos are replaced by data-enabled customer-centric processes and experiences with a shared customer ownership layer (respective of all applicable privacy regulations) across business functions.

Employing this shared customer ownership model establishes a common and exhaustive data repository to understand the customer from every angle to predict and meet their current and future needs, with data that may include lending and servicing information, signals, triggers, internal transaction history, voice of the customer, channel and other preferences, customer satisfaction survey results, and curated external data.

But this kind of data store may be too complex to curate and maintain. What can be created is a repository with a continuous event data stream of relevant customer transaction history that is continually enriched and leveraged to drive real-time insights for best actions and offers, respective of all applicable privacy regulations. 

Benefits of using the cross-P&L lending approach include improved efficiency and lowered costs by standardizing, simplifying and digitizing front-, middle- and back-office processes across all lending functions. It also enables more effective cross-selling opportunities between business units to increase customer wallet share and generate a personalized customer experience regardless of service or channel desired.

Two examples of the cross-P&L lending transformation approach

A large North American bank is redesigning its loan originations and servicing capabilities and modernizing its technology stack to offer a digitized and standardized customer experience across all mortgage, auto, card and unsecured lending functions. This transformation is expected to reduce processing time from application capture to close by 35% and yield greater than $100m in annual benefits while providing markedly improved customer experiences.

The second example concerns a global bank that is using its customer experience labs to create digital capabilities across all lending functions and is more effectively offering adjacent products and services, such as an unsecured loan, post-mortgage closing, when many homeowners are in the market for additional home improvements. 



Consumer lending approach 3: the ecosystem model

A lending ecosystem that includes adjacent services and bundles to complement customers’ buying needs.

More and more FIs are extending their consumer lending models to create a fully connected lending ecosystem. By broadening the aperture beyond singular lending offerings and providing interconnected services, lenders who establish these ecosystems can effectively integrate partner solutions and curate bundles that serve their customers’ holistic buying needs.

As such, FIs should embrace a fully connected lending ecosystem model by partnering with technology, FinTech and other third-party providers to streamline processes, cut costs and provide the products, services and experiences that their customers want and demand, while increasing wallet share and customer loyalty.

Two examples of the fully connected ecosystem lending approach 

A Singapore-based bank creataed its own consumer lending marketplace to remain competitive by offering a one-stop portal for property listings, cars, travel and utilities, allowing its customers to secure loans instantly.

Meanwhile, a Chinese insurance giant built a staggering online audience of 538 million users by integrating the user experience for finance, health care, auto and real estate products and services. 



Where does the consumer lending industry go next?

BNPL, embedded finance models and the super app’s emergence are reshaping the lending landscape.

While ecosystem lending is a major consideration and a step many FIs are taking, buy now, pay later (BNPL) and embedded finance models are becoming more mainstream and are also affecting the lending landscape. On the horizon is the emergence of the “super app,” which is a model for “everything banking.” Instead of offering multiple apps with singular functions, such as banking, shopping or making payments, a super app offers a one-stop shop or full ecosystem of products and services in one application. Benefits of the super app approach include leveraging data to deliver new and improved services, growing the customer base with minimal disruptions to the customer experience, using existing digital products and customer experiences to increase brand value in different industries, and offering the opportunity to intercept customers from competitors.


Successful lenders are addressing today’s challenges by upgrading their legacy platforms and investing in technology and data to transform their approaches from single P&L-centric models to cross-P&L and ecosystem lending strategies that deliver curated service bundles that provide holistic customer value. They are putting the customer squarely at the center of the lending equation and are focused on standardizing, simplifying and digitizing front-, middle- and back-office processes across all retail asset classes and channels to drive top-of-funnel growth, increase efficiency and throughput, reduce costs, and enhance the end-customer experience.

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