With alternative lending attracting a bevy of lenders, end customers are enjoying more choices than ever. As a result, customer acquisition costs are rising. The price for bidding for keywords like “personal loans” or “refinance credit card” on Google AdWords, has gone up significantly. Among the top twenty keyword categories, the words that demand the highest cost per click are “loans” and “credit”.
Hunting for borrowers is being done via direct mail as well as through social media sites such as Facebook. Some lenders also list their credit offers on comparative shopping sites like Credit Karma and LendingTree. Kenneth Lin, founder and CEO of Credit Karma, shared in an article that lenders today pay 20 percent to 30 percent more to connect with a customer who may or may not generate revenue.
In order to grow in this competitive environment, lenders need to create a long term solution to lower their overall costs. We share the 5 key ways lenders can bring down costs:
Automate lending with auto-decisioning: Lenders need a simple, intuitive user interface for originating loans and need a solution with powerful auto-decisioning capabilities for automated and instantaneous loan processing and funding. Automated lending is more scalable and lowers costs versus manual origination and underwriting.
Improve lead conversion with a better user experience: Lenders need to create a responsive online lending experience with complete configurability and a 6-click user experience. Providing a user experience where a borrower can apply for a loan, accept the loan offer and e-sign the documents with just six clicks can create a ‘wow’ user experience, more loans and happier customers.
Lower operational cost with an on-demand cloud solution: An on-demand cloud-based solution can help lenders not only drive down costs but also quickly adapt to changing market conditions. A cloud-based solution provides the flexibility to launch new products quickly and provide multi-channel access to reach the borrower.
Focus on product differentiation: The competitive advantage for lenders is in pushing out new products at scale. A flexible technology platform with highly configurable auto-decisioning capabilities, workflow and task management and easy third-party integrations can help lenders quickly provide new innovative solutions.
Participate in a secondary marketplace: A secondary marketplace where lenders can easily exchange loan applications can greatly reduce customer acquisition costs. Lenders can put a loan application that does not fit their specific credit box into an exchange for other lenders to bid on, and fulfill. Not only does this help lenders to improve efficiency but also turn their non-conforming loan applications into referral income.
So while customer acquisition costs keeps rising, lenders who focus on their core competencies and invest in technology will be the most competitive. A cloud-based lending platform can be an excellent solution offering the flexibility, transparency and scale that is needed to grow in this disruptive environment. Buying a cloud-based platform from technology vendors such as Cloud Lending can help lenders quickly transform their lending experience to gain and retain more customers.