The diverse needs of borrowers and the critical role of technology

It has been almost two years since the start of the pandemic and most consumers are still under intense financial pressure. In turn, this is having an impact on lenders and their ability to provide solutions to match the diverse needs of borrowers.

Rising interest rates, a hike in inflation, and higher energy prices have increased the cost of living, putting more pressure on borrowers. In addition, a change in working habits, with more people working at home, has created a more layered spectrum of consumers with a broad range of requirements.

While some of these changes were expected, and proactive lenders have been adapting their affordability criteria, some world events could not be anticipated. A key part of a lender’s ability to stay ahead of changes in the present is intelligent and automated technology that aggregates payment data via open banking APIs. This not only allows lenders to deliver the most affordable solution to borrowers that is tailored to an individual - it also protects the lender from potential risk. Some lenders have also been reaching out to vulnerable borrowers, before their financial situation becomes untenable, to offer support.

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By proactively looking at world and financial events, we have been able to adjust our affordability model. It also made us look at customers we’ve already lent to from a credit risk perspective. We’ve looked back and tried to understand what percentage of our customer borrowing base would still have a financial buffer, if they’d applied with us today for a loan. We then identified the highest risk customer segment and have been reaching out to them to say - if they are struggling, we’re here to help."

247 Money

Our latest report, which surveyed 2,000 UK borrowers, indicated that there is a growing acceptance amongst consumers of using such data integration techniques, especially as it allows for restructuring according to a change in circumstances. Without automation and flexible credit management technology, to create the most up to date picture, lenders will struggle to create personalised offerings at scale.

An interesting development across the industry was a growing demand from borrowers for human interaction with their lenders. As much as customers expressed appreciation for self-service and being able to access their data online, the last two years saw a significant increase in phone calls as people sought human interaction.

Speaking about this development, Louis said:

“For those customers that want a digital experience, it’s still there, but for those that want to speak to someone, we still offer that service. Every customer not only has unique financial requirements, but also a level of comfort with sharing their data and completing the whole process without talking to another person.”

Another vital component, in addition to the adoption of technology and integrated data, is a significant change in culture. More than ever, the needs of the customer have to be prioritised, but also individuals who may have been excluded in the past due to unusual circumstances, are now able to find a suitable loan. This change will build an individual’s loyalty to a lender as they flex and change the solution when circumstances change. This level of integration and personalisation is unprecedented, and recognising that each borrower is unique, is essential for long term success in the industry.