Digital Products For The Next Generation
Author: Bart Hall
In real estate it’s all about location, location, location.
But for financial institutions that want to succeed and prosper, the mantra should be digital, digital, digital. Why digital? Millennials. Millennials use digital services and Millennials are the largest generation to be born in the history of the United States. Millennials are in line to inherit $30 trillion from their baby boomer parents. $30 trillion. That’s a lot of zeros! How they decide to bank this money or not bank this money will largely determine the success or failure of community financial institutions. Digital offerings available on a mobile phone are a key component, but other digital tools are available to take advantage of this $30 trillion opportunity.
One such tool is digital lending technology. Digital lending is the end-to-end, cloud-based technology that automates the entire lending process - from application and underwriting to set up, review and renewal - that allows your institution to provide consumer and small business loans more efficiently.
In addition to providing customers what they want, digital processes can significantly lower operating costs. For instances data from BAI shows that without digital processes, the cost to underwrite a small business loan using traditional paper-based processes is approximately $4,000 per loan for loans less than $500,000, but using automated, data-driven underwriting technology, lenders can reduce that cost to about $600 to $900, providing a savings over $3,000 per loan!
According to the ABA, financial institutions that use traditional loan processes have operating expenses equivalent to six cents for every dollar in outstanding loans, compared to two cents for alternative lenders that process their loans digitally. With digital lending, you have the ability to process small business loans more efficiently and in a much more cost-effective manner resulting in more revenue, higher margins and increased profitability. And remember, in 5 years Millennials will be running these small businesses you’re looking to lend to.
Serving borrowers with digital product offerings is no longer an option; it is imperative in order to retain and gain customers. Your younger customers are actively seeking digital interaction with your institution and if you don’t offer it, many will find an alternative provider.
If you don’t believe me, these statistics should help:
~ Digitalbankingreport.com notes that that the number of adults worldwide who will access financial services digitally will increase by 53 percent over the next 3 years.
~ The Oracle Report states that 68% of retail financial services consumers say they prefer to get a consumer loan via digital channels.
~ A leading research firm found that over half of consumers said they would use fintech services through their financial institutions if they were offered.
Digital lending technology ensures your institution meets the demands of an increasingly digital society and helps safeguard and grow your customer relationships. The technology streamlines processes to increase revenue and profitability and enhance the consumer experience.
The digital world is here and financial institutions that don’t move forward with digital products will be left behind. But remember, as you research options and review digital products, include your IT team and ISO as cyber risk is an inherent risk in any new digital product.
What digital products are you offering to attract the next generation? How do you plan to get a piece of the $30 trillion pie?
April 23, 2019