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Indirect Borrowers and the Importance of Convenience

By Temenos reporter 21 Mar 2016

Forbes reported that credit union auto loan portfolios have grown close to 30% since 2012. This is in part due to the improved economy, but also the trend we’ve seen of financial institutions gravitating more toward indirect lending programs. SWBC's article "Serve Indirect Borrowers with Convenient Payment Solutions" stresses the importance of having a solid indirect payment solution for your indirect portfolio. As the author stated in the article, this investment invariably "can lead to stronger relationships with new borrowers and potential income streams".

So what does that mean? Think about it this way, for every new auto loan that comes in, not only are you growing your portfolio, but it's also a chance to deepen the relationship with your new account holders in an impactful way. But how do you continue to win them over after you've won their business for an auto loan? Well, the word for today's blog is convenience.

I certainly would pay extra for it. Those of you that have kids (as well as those of you that don’t, but in a different way) know the effort it takes to get to work on time. I won’t steer us too far off course by sharing the details of my morning (it involved a 2.5-year-old dictator and a lost stuffed animal) but you get it, our schedules are full with work, the demands from our personal lives, travel time and impromptu activities. (Like handling that “check engine” nuisance which I really need to take care of!) In case you were wondering, yes, I did make it into the office on time :) But why wouldn't the average Joe or Jane expect, or at least want, our chosen financial institution to support us in our bustling lives by offering an online payment portal where we can make a payment on our laptop, tablet or smartphone? And we expect that online solution to be secure, right?

If I haven't sold you on that paragraph alone, then you should check out the points the author made regarding the additional benefits for having an online payment solution. A few highlights with my take include:

  • Saving a phone call and additional response time from your internal resources.
  • Cutting down costs by providing a way for borrowers to self-serve their own payments. It can also reduce the risk of your account holders potentially missing a payment due to the lack of convenience of having to call their financial institution in order to place a phone payment with a staff member. (Have you ever put off making a call to “take care of business” because it interrupted your day? Or you just forgot until business hours were over?)
  • Improving the ways you invest in your financial institution: Hiring and maintaining multiple employees to manually handle payments creates overhead for recruiting, hiring, training, wages and other expenses. But more than cutting costs, those funds could be more effectively used to invest in other areas of your institution, such as expanding your efforts and human-power in origination.
  • Making a positive first impression with your indirect borrowers. This helps lay a solid foundation of trust that can potentially turn them into a multi-product account holder. That means cross-selling multiple products and services. For example, credit cards, home loans, auto insurance, and checking and saving accounts. This cross-selling opportunity can potentially increase annual revenue!
  • Creating and offering additional security. Thisallows employees and account holders alike to rest easy, knowing that confidential information is less likely to end up in the wrong hands. It can also help mitigate some forms of risk, since calling to make a payment over the phone also leaves room for human error, and thus disgruntled account holders.
  • Encouraging account holders to get rid of paper. This is beneficial both from a cost standpoint and a security standpoint. By removing paper, you are cutting costs in producing and mailing letters, but you are also cutting out the risk that the wrong person will open mail with personal information about your account holder.

In a market full of low auto interest rates and tougher competition, those who want to maintain a competitive need to capitalize on technology to attract indirect borrowers, making for happier account holders.

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