Neo-lenders need to focus on financial well-being to win consumers’ trust
Today, Frollo, the Australian leader in Open Banking solutions, and EML, a global leader in payments have published ‘Trust and the future of consumer lending’: a white paper on neo-lenders’ challenges with consumer trust and their unique position to capitalise on innovations in Open Banking, payments and personal finance management to win back that trust.
The research shows that when consumers take out a personal loan, they place very high importance on dealing with a lender who ensures they don’t take out a loan they can’t afford, and helps them pay it down after they’ve taken it out. They also want their lender to provide them with tools to better manage their money and improve their finances. Consumers want to deal with a lender who has their best interests at heart (relationship trust).
The challenge with trust
Trust is a foundational element when consumers are making purchase decisions. 81% of consumers say trust impacts their purchase decisions and 46% of consumers who switched companies in the past year did so because they lost trust in the company.
The overall trust level for big banks is currently at 23%, compared to just 10% for fintechs. Specifically, consumers are more trusting of traditional financial institutions to handle their personal information (information trust) and transaction data (prudential trust).
Innovating to win back trust
Although neo-lenders are ahead of traditional banks when it comes to relationship trust, they still need to be aware of these trust issues and build on them to their competitive advantage.
The research shows that features powered by innovations in Open Banking, payments and personal finance management to build information, prudential and relationship trust are deemed very important by consumers.
- Income & Expense verification: The majority of younger people and almost half of all respondents (41%) are looking to share their financial information digitally to get an instant credit decision – something Open Banking allows them to do
- Instant access to funds: Getting instant access to funds via a virtual debit card is deemed very important by 38% of respondents. This is most important for the younger demographic, with 61% of 18 – 34 year olds rating this of high importance
- Emergency buffer: The ability to draw on an emergency buffer by turning a debit into a loan that can be paid off in instalments is popular with the majority of younger and middle-aged people. At least 50% of respondents below 50 rate this feature of high importance when taking out a personal loan
- Personal Finance Management: Most respondents are looking for lendings to offer them personal finance management features, like seeing all their accounts in one place, setting a cap on spend categories, helping them track their money and getting insights on how to improve their finances. On average, 68% of all respondents rate this of high importance. 79% of 18 – 34 year olds find this very important
- Responsible lending: Consumers overwhelmingly value dealing with a lender who ensures you don’t take out a loan you can’t afford, and helps you pay it down after you’ve taken it out. 76% of all respondents rate this of high importance, and this is consistent across ages and income brackets
Trust and the future of consumer lending
For more insights, interviews with industry leaders from Latitude, humm & Plenti, and a solution to help win back consumer trust, download the white paper here.
