Graham Donald

Graham Donald is a director of Pancredit.

Consumer confidence in high street lenders is at an all time low. Following yet another revelation that British banks have been mis-selling financial products to their customers, this time for identity theft and credit card protection insurance, the need for high street lenders to prove that they are changing their lending behaviour has never been so great.  If banks are serious about winning back the hearts of their customers, they must actively demonstrate their commitment to responsible lending, writes Graham Donald.

A high proportion of UK borrowers continue to operate on extremely tight budgets. As this environment of financial instability persists, demand for unsecured loans continues to rise, outstripping the supply of available products. Non-traditional lenders including, among others, payday and peer-to-peer lenders, have moved quickly to plug the gap and cement themselves as providers of convenient, fast and easy access alternatives to loans from high street banks.

As the market expands to accommodate these new players, high-street lenders must demonstrate that they have learned from past mistakes and position themselves not only as deserving the trust of the consumer, but also as experts in helping them manage their financial affairs. Ensuring that their customers apply for, and are granted, affordable loan products is a key fundamental of this commitment. As the market continues to gather pace, banks and other financial institutions seeking to lend responsibly should be taking steps today to investigate how technology can weave the responsible lending ethos into their day to day operations, particularly when the technologies on offer can also help them to speed up their operations, cut costs and free up internal resources at the same time.

Intelligent decision making systems sit at the heart of this effort and are helping lenders keep pace with an evolving market.

By deepening the affordability assessment that is performed on customers applying for loans, and by intelligently matching customers with loan products that are suited to their financial circumstances, these systems ensure that the computer only says ‘yes’ when all the lending rules have been passed. But there’s more to it than this. By automatically validating a customer’s personal information after it is entered (for example the amount of existing debtor outstanding County Court Judgements), these systems will display to the bank’s staff only loan products that befit their borrowing profile.

Such systems are saving countless hours of needless administration, for both customer and lender. They also enable the bank’s computer to say ‘yes’ more often, and faster than before, reducing the bank’s cost of acquisition and significantly improving both conversion rates for the bank and the loan application experience of the customer.

Market demands for quick cash loans have fuelled consumer expectations for instant decisions on unsecured loan applications and, like it or not, traditional lenders now need to adjust their processes in order to keep pace with the market. By enhancing their operational agility together with the quality of their loan decision making, intelligent, automated systems are enabling high street banks to regain their competitive standing and win back the trust and respect of the consumer.