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Marketplace lenders aren’t banks’ threat—lack of digital engagement is

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  • Written by  Pierre Naudé, nCino
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  • Comments:   DISQUS_COMMENTS
UNconventional Wisdom is a periodic guest blog where the conventional wisdom is held up for fresh inspection. If you have some "UNconventional Wisdom" to share, email scocheo@sbpub.com. UNconventional Wisdom is a periodic guest blog where the conventional wisdom is held up for fresh inspection. If you have some "UNconventional Wisdom" to share, email scocheo@sbpub.com.

In December 2008, the CEO of Blockbuster said, “Neither Redbox nor Netflix are even on the radar screen in terms of competition.” Fast forward three years, and the world’s biggest movie-rental company filed for bankruptcy and closed stores around the country.

Blockbuster had the product consumers wanted—popular movies, television shows, and video games always in stock, essentially on demand. The problem? It failed to recognize shifting preferences for how its customers wanted those same products delivered.

It’s not just the movie business that has changed; digital engagement permeates all spheres.

Domino’s Pizza securely stores customers’ credit card information, addresses and pizza preferences, and allows the customer to track the status of their order in real time. UPS and FedEx provide customers complete transparency into the status and precise whereabouts of their shipment. And Amazon, perhaps the most progressive digital advocate, creates a virtual, personalized shopping experience on any device from wherever the customer happens to be at any given time.

Many banks have learned a lesson from Blockbuster’s stubbornness; they’ve discovered that providing the right services does not guarantee success if you’re not delivering them the right way. Banks that are offering tailored digital experiences are making progressive moves to secure their future success.

Don’t fear alternative lenders

Since alternative lenders arrived on the scene with their flashy promises of instant decisions and quick access to money, bankers have been nervous—admitting it or not.

However, these alternative lenders’ business models are inherently flawed. They’re proud of their lack of governing oversight, wearing it on their sleeve like a badge of honor. Eventually regulation will catch up to these players and their businesses will retract, demonstrating that these “disruptors” are more hype than help.

Get this: The biggest threat to bankers isn’t the loud noise of alternative lenders, but rather, being left behind by our peers. Banks realize increasingly that the key to survival is to digitally engage with customers in a way that is quick and intuitive, as Netflix and Amazon have done so successfully.

Digitally engaging with consumers requires more than simply offering a mobile banking app. Instead, banks must find ways to digitize and streamline every interaction, from lending to cross sales. Alternative lenders, while a thorn in traditional banking’s side, have proven that speed and convenience are more important to consumers than even price.

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If banks take a hint from alternative lenders’ model, they can run routine loan decisions against their existing, proven credit policies while freeing up lenders to spend their time on cases that require more attention. This allows banks to adjust to shifting consumer preferences, while still practicing responsible and compliant banking.  [Editor's note: See “Counterintuitive: Bankers still matter,” in the June/July Banking Exchange magazine.] 

Banks must also use data collected about the consumer to personalize their experiences. Consumers don’t mind when Amazon presents cross-sell opportunities based on their previous buying patterns, nor are they bothered when Domino’s or Papa John’s suggests adding a soda or breadsticks to their order.

So why should banks be shy about doing the same?

Consumers expect us to know them and use that knowledge to present relevant offers that make their lives easier.

Take the bank to the customer

For dealings where face-to-face interaction is required, bankers must be armed with mobility. Most consumers dread going to the branch, so the branch should be flexible enough to go to them. By arming bankers with tablets and smartphones capable of accessing and executing the same functions on the go as done in-branch, they will be liberated from their desks and free to meet customers where most convenient for them.

As safeguards to consumers and businesses’ finances, bankers simply can’t take their jobs lightly. In a world where customers can order food, purchase groceries, and watch movies from anywhere, anytime with a swipe of their finger or click of a button, bank services must be just as accessible, consistent, convenient, and digital. The truth is, banks are no longer competing with the financial institution down the street, or even the large national players.

Communities have changed. They are no longer about physical locations, brick and mortar stores and shops. Instead, communities have moved to the cloud.

While no virtual communication can ever replace face-to-face interaction, relationships can still be maintained by finding ways to customize and optimize digital connections with customers.

Digital engagement is doable, and furthermore, it’s working.

Innovative banks are already adapting, giving customers not only the services they want, but in the way they want them. Don’t become the next Blockbuster headline. Take a hint from today’s digital engagement leaders outside of this industry and provide similar tools and technology to give customers a great banking experience, and set your institution apart.

About the author

Pierre Naudé is CEO of nCino. He has more than 30 years experience in the financial technology industry. Prior to nCino, Naudé served as divisional president of Community Financial for S1 Corp. until its acquisition by ACI Worldwide. nCino offers a secure, cloud-based Bank Operating System that combines CRM, loan origination, workflow, enterprise content management, and instant reporting capabilities.

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