3 ways to retain customers and prevent rate shopping
Maintaining a high loan renewal rate is critical for community institutions right now. Many institutions are experiencing slowing loan demand amid historically high interest rates, and there is more competition than ever before with online lenders and other nontraditional lenders offering competitive rates. In times like this, borrowers could choose their lender based on rates alone come renewal time.
When it comes to personalized service and meaningful relationships, community institutions outshine online lenders and other competition every time. However, this element is no longer enough on its own. Banks must ensure that they’re modernizing and streamlining processes to remove barriers to renewal. If it’s too difficult to renew, banks risk borrowers going elsewhere.
To retain customers and prevent rate shopping, here are three best practices for community institutions to consider.
Digitally optimize the renewal process
Too many community institutions still require customers to print, scan, and manually fill out forms for the renewal process. This is not only a time-consuming and often frustrating requirement, but it is typically exacerbated by asking borrowers to provide information that the bank already has, such as basic address and license details. Not only does this repetition waste time, but it communicates to the customer that the bank doesn’t know them, diluting the relationship and any loyalty.
Strategically leveraging technology to simplify, digitize, and automate the renewal process makes it quicker and more efficient for everyone involved. For example, incorporating automated workflows can alert borrowers to when it’s time to start the application. Having an intuitive online application integrated into the bank’s loan management system allows borrowers to apply for renewal wherever and whenever they prefer, all without the requirement to reenter information. And secure document upload capabilities provide added convenience by removing the need to drive to the branch.
Modern technology not only makes the renewal process easier for the borrower, but the lender as well. The cost to serve is lower with a digital process, as bank employees are able to manage more renewals with existing resources.
Boost stickiness with more relevant product offerings
Cross selling can have significant impact on loan renewals since a borrower is far less likely to take their loan elsewhere if they are utilizing other products and services with that institution. However, effective cross selling has become more challenging now that fewer conversations happen over the teller counter and more interactions happen online.
Community institutions that leverage technology to gain transparency into their customer relationships will be well positioned to offer the right products and services at relevant times, creating stickier relationships. For instance, if a lender knows a customer is in the market for a new vehicle, they could proactively share financing options or a pre-approval. A sophisticated relationship aggregation tool can support these efforts by providing an in-depth look at customers at a glance.
Build a personal relationship with frequent communication
It’s no secret that satisfied customers and personal relationships are the cornerstone of community banking. The strength of a borrower’s relationship to their lender can be a critical factor in a renewal decision. This is another area where technology can be a valuable asset – having holistic portfolio management and reporting tools in place help bankers know when it’s time to proactively reach out to borrowers. Initiating frequent check ins and engagement show a borrower the bank cares while staying on top of any potential red flags. And, automating and streamlining previously tedious, manual tasks allows bankers to spend more time out in the community and focusing on customer relationships.
As retaining loans and relationships becomes increasingly important in the highly competitive environment, taking proactive steps like these can solidify loyalty and prevent rate shopping. Digitizing the renewal process and forming stickier, more personal relationships will help community banks deepen customer loyalty while reducing churn and positively contributing to their bottom line.
About Author:
Joe Ehrhardt, CEO and founder of Teslar Software