Right first time lending - the brand impact of saying no

Retail Financial Services

Retail Financial Services

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Moderator: Collette Dunn, Milliman

Expert:  Brian Brodie – Freedom Finance

  • Sometimes saying no can be the hardest thing, well not for banks as they tend to be quite tough these days.  However when a bank does say no – is it a lost opportunity to build a relationship which might pay dividends in the future?
  • I always remember the presentation of how a certain favourite airline’s clients who had had a really good flight or even an okay flight were less loyal than those who had had a difficult time of it and then been supported well.
  • So handle the rejection with panache and offer them a worthy alternative and one day when they are more likely to be told yes they will think of you warmly.
  • This session will look at the ‘no’ customer journey and advocate working with, dare we say, competitors – brands with an offering that might be suitable for the rejected client.
  • Brian Brodie, Freedom Finance, provided an introduction which highlighted a number of statistics around retail finance.  For example, 59% of customers said that they would have bought elsewhere if finance was not available.  Also, 72% of customers said that they would have postponed their purchase if finance was not available.  Clearly the availability of finance at the point-of-sale is important to maintain sales.
  • Retail finance requires the retailer to work with a lender.  In order to maximise the times when the lender will say ‘yes’ to the consumer, one solution is to work with multiple lenders, potentially via a single platform/broker.
  • Lenders have different consumer profiles of who they would like to lend to and therefore credit worthiness varies according to the lender in question.  A strategy for maximising the number of consumers who get a ‘yes’ is for the retailer needs to find a lender that desires a consumer profile that is similar to their customer base.  Despite this, there are likely to be times when the lender says ‘no’ to the consumer.
  • One of the retailers in the room said ‘no’ to approximately 70% of consumers who asked for a loan to buy a product from them.  They have honed their own credit worthiness profile which is so refined that they can reject consumers according to their browse history on their website (how they browse and attempt to purchase a product and request a loan).  They do not hand off to anyone to allow their customer to get a loan elsewhere.
  • As an alternative, one of the other members of the group is working with lenders on a project titles ‘no dead end’.  The objective is that, when consumers are turned down for a loan, they either get passed to another more suitable lender, or they get information on why they got turned down and what they can do to improve their credit worthiness.
  • Retailers passing consumers to alternative lenders to maximise the numbers who get a loan is common.  Lenders may also pass their consumers on when they have been rejected for a loan. For example, Barclays passing rejected consumers to Freedom Finance.
  • The group acknowledged that there would always be a section of consumers who would not pass credit worthiness with any lender. 
  • The way credit worthiness is established is evolving.  PSD2 will allow organisations to ask customers to show their current accounts.  Credit bureaux are emerging that seek to build a credit score by analysing a consumer’s social media activity.
  • To wrap-up we concluded that there were various techniques that organisations are using to maximise the chance of saying ‘yes’ to a consumer who would like to borrow money.