Your lending business’ growth can only be as strong as your lender-borrower relationships.
The real differentiator is not necessarily your product, but how you interact with your borrowers across the entire lending lifecycle and beyond.
If you fail to invest in your borrowers’ satisfaction with you, you could lose borrowers to your competitors.
Instead, if you commit to making it about them, you’ll position your business to take full advantage of borrower behavior shifts, and get a leg up on the lending market.
The bedrock of this borrower satisfaction drive is made up of two focus areas: borrower engagement and borrower experience. In other words, how you connect with them and how that connection feels to them. Both are critical to keeping returning and referring others.
In this article, we’ll explore borrower engagement and experience, how they differ, and why improving both is key to building stronger relationships and better business outcomes in consumer lending.
What Do Borrower Engagement and Borrower Experience Mean?
Borrower engagement and borrower experience are distinct but complementary concepts.
Engagement is about connecting and communicating with borrowers throughout their loan journey, from application to loan maturity and beyond. It involves keeping borrowers informed, addressing their needs, and building trust through consistent interaction that focuses on them first.
Borrower experience refers to the overall journey that your borrower has when interacting with your business, from initial inquiry to loan repayment, and how they feel throughout that journey. Do they feel supported? Are they just a number? Are they cared for?
When you think about both together, every touchpoint is an opportunity to strengthen your relationship with your borrower. Improving the lending experience tends to be a natural consequence of taking such a purposeful borrower-centric approach.
Conversely, a single negative experience can quickly sour their impression of you as a small lender.
Why Borrower Engagement and Borrower Experience Are Essential
A couple of years ago, a study showed that borrowers with high credit scores, and younger borrowers in general, are more informed when it comes to shopping for lending products.
And according to more than half of Gen Z, a borrower should gather as much information as possible on lenders and their products. The key here is that it’s not just about the product: In the financial services industry in general, 80% of consumers consider a product’s quality not to be a loyalty driver—the lowest percentage across industries.
In other words, borrowers have high standards when it comes to loan servicing—and they are only getting higher.
Putting borrower engagement, and the borrower experience as a whole, front and center of your strategy has become a prerequisite to remaining competitive. In fact, a single bad experience can drive borrowers away, into the arms of other lenders.
However, when done right, expect to make a real difference.
Once you’ve earned your borrower’s loyalty, retention and repeat business are a natural outcome.
A secondary benefit is that a positive borrower experience also drives brand advocacy. Borrowers with a great experience are more likely to share it with others, helping build your reputation and expand your borrower base.
Of course, the opposite can also occur: Provide a bad experience, and the borrower may well tell multiple people to avoid you.
Ultimately, engaged borrowers will more easily take out another loan with you in the future, and recommend you to others in a heartbeat.
6 Key Borrower Experience Elements for Success
Let’s look at six core areas of your borrower experience where excellence will drive your performance and truly engage your borrowers.
- Be transparent: Clearly explain terms, processes, and fees upfront. Simple, honest language builds trust and cuts confusion.
- Communicate consistently: Keep borrowers in the loop with timely updates and fast replies. It shows you value their time.
- Make it convenient: Enable and help borrowers to complete and deliver everything (documents, payments, updates, etc.) digitally, and on their schedule. It should be straightforward and simple.
- Personalize the journey: Tailor offers and support to each borrower’s needs and unique circumstances. A personal touch can make a customer feel special.
- Build trust: Protect their data, treat them fairly, and stay consistent and true to your word. If difficulty with repayment arises, an empathetic approach can engender trust.
- Speed it up: Fast processes, automated systems, quick approvals, and prompt replies all matter. Delays, real or perceived, can push borrowers to abandon the application process and go to a competitor instead.
By achieving excellence in all six of these areas, your market offering will stand above and beyond your competitors.
Winning Borrower Engagement Strategies
With targeted engagement throughout your borrower funnel and loan lifecycle, you can boost satisfaction, retention, advocacy, and repeat business.
Let’s break down how to engage borrowers at the three key stages: Application, origination, and repayment.
Application
To engage borrowers from the off, make the process simple and convenient.
Streamline the application by offering online forms that are quick to fill out, and minimize paperwork. Providing clear instructions at each step ensures borrowers know exactly what to do—and expect.
Digital onboarding options, such as automatic document uploads and identity verification, add convenience. This cuts down on friction and makes borrowers feel confident and in control. Plus, bank data acquisition from the lender’s side means it’s less of a hassle for borrowers to provide that information.
Origination and Disbursement
So many lenders make the mistake of assuming that once the borrower submits their application, engagement is done. But in reality, by this point engagement is only really getting warmed up.
Keep your applicants informed with regular updates about their loan status. Transparency is crucial here, which you can embed throughout the process by letting borrowers know what’s going on, when they can expect a decision, and if you need anything else from them.
Offering personalized loan terms to each borrower based on their specific financial situation can help you to build trust and satisfaction.
Such an inclusive and modern approach demonstrates to borrowers that you’re committed to serving them, and adapting to changing market needs.
With Bankuity’s Advanced Banking Verification (ABV) you can get to know your borrowers via real-time data. It’s easier to know what they need, how they prefer it, and what you should expect from them.
Repayment
The final phase of borrower engagement happens during repayment.
At this stage, staying connected is crucial for ensuring a smooth process. Reach out proactively to address any concerns borrowers may have, whether it’s difficulty making a payment or needing to adjust terms.
Offering personalized repayment reminders tailored to each borrower’s preferences helps keep them on track.
And don’t forget to ask for feedback on their experience, which shows that you value their input in helping you improve your services. In fact, surveys can be useful at every stage.
Ultimately, with such a careful approach, you’ll maximize repayment success and lower default risk.
Power Your Lending Business Growth
Improving borrower engagement and borrower experience is critical for the long-term success of lending organizations like yours.
By engaging borrowers throughout their journey with you, with clear communication, personalized solutions, and timely support, you can win more business, earn their loyalty, and grow recommendations. Moreover, you set yourself apart from the market too by garnering a reputation for going above and beyond.
And as a small lender, you have an outstanding advantage: It’s easier and faster to innovate compared to larger financial institutions, which tend to be much slower due to their size, legacy systems, and investment requirements.
Eager to put all of this into action but not sure where to start?
Schedule a demo with Bankuity today and discover how we’ve helped small lenders across the United States like you to grow their customer base, build brand loyalty, and boost recommendations with the power of rich customer data insights.
