Survey Finds 28% Are Making Payments Online
Amplified Web interaction with customers due to a tighter mortgage market and the need to reduce operating costs is helping servicers optimize service quality, increase customer satisfaction and retention levels within their online customer base.
Findings by a recent J.D. Power and Associates, Westlake Village, Calif., study presented at the Mortgage Bankers Association's National Mortgage Servicing Conference here show an important change in client attitude.
In 2007, the number of customers using online payments increased to 28% of all customers. Meanwhile, even though customers who continue to make payments by mail represent the highest overall percentage, use of this option has been decreasing. Only the number of customers automatically deducting their monthly mortgage payments by their bank remains constant.
As billing trends "continue to move away from the traditional payment coupon book and toward electronic options," according to the 2007 Primary Mortgage Servicer Satisfaction Study, customers who receive billing statements electronically "have the highest satisfaction."
The overall customer satisfaction index (varying from 0-1000) is at 840 for customers who receive their bills via e-mail or other online notification (or 10% of all customers), compared to 792 for those who receive statements in the mail (which still represents the largest group or 64% of all customers) and 782 for customers using payment coupon books.
The trend is credited for higher customer retention levels among this group and as importantly for servicers, lower online servicing costs. The study indicates "leveraging electronic customer communication capabilities" is one of five key practices that ensure the highest customer satisfaction experience. According to Tim Ryan, senior director at J.D. Power and Associates, who was one of the panelists of the conference, higher online interaction has resulted in a steady increase of customer satisfaction from 2006 to 2007. The study shows a direct link between online interaction and customer satisfaction. It found that when it comes to payment methods, the overall satisfaction index is at 808 for customers paying online, or 28% of all customers, and at 779 for customers paying by mail, or 40% of all customers. The satisfaction index drops to 700, or the lowest, among customers using telephone payments.
As a rule, customers who prefer to contact their lender-servicers online, as well as all other customers who express higher levels of satisfaction about their servicer, usually feature higher loyalty and additional product usage. The study also found that highly committed customers are significantly more likely than moderately committed customers to recommend their lender to others, consider them for their next home loan, or refinance, or stay with their current lender. Highly committed customers also hold 50% more additional products.
Independent consultant Greg S. Genua also noted that in this day and age "customer service and satisfaction are one and the same," so the sum of offering online options, using e-mail as a communication tool, encouraging online self-service and offering adequate workout options helps improve market penetration.
"Is the servicer projecting empathy to the borrower? If yes, there's a substantial pay off for it in improved retention," Mr. Ryan said.
According to J.D. Power and Associates, currently the mortgage industry's 14% retention rate is low compared to other industries. It increases to 28% for lenders who provide excellent overall customer experience, indicating that the financial impact of high satisfaction results in doubling customer retention among customers who prepay to refinance a loan or buy a new home.
The study suggests it "can result in an increase in mortgage servicing right valuations of 2.73% or $38 million on a hypothetical portfolio of $100 billion. The value of the impact across product lines or in different aspects of one product line, such as originating or servicing first liens for example, "multiplies that retention potential." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/