Opinion

Lenders must invest in enhanced customer experiences — or fall behind

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As the COVID-19 crisis continues to transform our economy, the companies that have been able to thrive and succeed are using technology to create differentiated customer-centric experiences. The likes of Amazon, Netflix and Spotify have set the gold standard when it comes to delivering customization and efficiencies to their existing customers. It is time for mortgage lenders to do the same.

The reality is that banks and lenders face tremendous competition when it comes to courting borrowers, including ones with whom they have existing relationships. While some large organizations are increasing their investment in technology to enhance their mortgage businesses, most lenders are still operating in an analog world.

The biggest challenge for mortgage lenders right now is that only 22% of borrowers stick around and become repeat customers. This is primarily due to the fact that the post-closing relationship a lender has with a borrower revolves around merely collecting the payment, with little outreach or value-added assistance. Losing these would-be repeat customers comes at a very high cost for lenders, who typically spend as much as $1,500 in acquisition costs on each new borrower.

The best investment that banks and lenders can make is in a true "customer engagement platform" that allows their existing customers to manage their existing home, search for a new home, and explore financing options all in one place. Incorporating this platform into the lender's website and mobile applications can mitigate the need for customers to make two external stops: one to an outside real estate database and one to a different mortgage provider.

If you are a loan officer or executive at a mortgage business, you have probably dreamt of having a Zillow-like platform embedded within your website. That no longer needs to be a dream thanks to the rise of companies specializing in real estate data and co-branded technology platforms.

However, it is not enough for lenders to invest in a dynamic user experience that offers customers instant access to properties and mortgage options. The implementation of a customer engagement platform should be supplemented by a thoughtful strategy to attract and retain new and existing customers.

First and foremost, it is important to entice your customers to want to explore your real estate platform once incorporated into your website. This can be done by prominently featuring the platform within online portals, customers' personal account pages, and personalized emails. Make customers aware that you are offering access to something new that can make their home buying experience far easier and more customized.

It is equally important to retain customer interest once they have engaged with your platform. Rather than let customers drift off to a competing property database or lender, continue to engage with customers through emails and follow-up interactions. This should include proactively delivering updates about the price of a customer's current home or alerts when new inventory lists that matches their search criteria.

Another important strategic initiative is taking time to understand a customer by tracking and evaluating his or her interactions on your platform. Assess whether they are saving properties in certain geographic areas or with specific attributes, using refi calculators, and sharing property listings with any other parties. There is a tremendous amount of insight that can be gleaned about a customer's intent and, in turn, applied to tailored follow-up communications.

America's biggest financial institutions are already beginning to understand the value of in-sourcing the home-buying experience. Given the volume of time that customers already spend on a financial institution's website, adding an enticing home-buying experience to the interface is a no-brainer. Savvy institutions are putting themselves in a position to reduce customer leakage and beat the industry average retention rate of 22% in the coming years.

The combination of investing in the right technology and adhering to the right strategy can underpin a differentiating customer experience that yields more loans. While there are a number of considerations, among them cost, enterprise security and compliance, now is the time for banks and nonbanks to use new technologies to compete more effectively than ever.

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