To remain relevant, listen to borrowers, not your gut. "Many established, successful market leaders failed simply because they gave customers more of what they asked for." That's just one perspective of many on why Blockbuster failed to remain relevant as the world around it went digital.
Hindsight being what it is, it’s easy to see now what Blockbuster did wrong then. Doing it differently is how many digital companies, both legitimate startups and incumbent spin-offs alike, are achieving such fast – and vast – success across verticals today.
History is a great teacher. Is your credit union accepting of the lessons we can learn by looking into the past?
Experiences From Digital Brands Re-frame Expectations
So many incumbent companies across verticals have crashed and burned because they ignored what mattered to customers in a new world where digital capabilities are capable of changing anything.
In Blockbuster’s case, the concept of “movie night” was being completely blown apart by new business models that delivered DVDs to the doorstep and new technology that enabled streaming films from the couch. What’s more, movie watchers were enjoying immediacy, pay-as-you-go affordability and customizable experiences from all kinds of digital brands. The movie rental industry had to keep up.
Digital Companies Reject Confirmation Bias
Was Blockbuster’s leadership blinded to the new market realities by hubris? By inertia? Whatever the institutional block, it seems they could not hear what the next generation of movie “goer” was telling them.
It’s not uncommon for successful legacy firms to fall into the confirmation bias trap. Dictionary.com, another iconic market disruptor, defines confirmation bias as the tendency to process and analyze information in such a way that it supports one’s preexisting ideas and convictions. Rather than opening their eyes to the changing world around them, incumbent leaders allow focus groups and other research to “confirm” what they “know” about their customers. In other words, they find data to support their existing theories, which does nothing to help them transform for the next phase of their businesses.
From Movie Borrowing to Money Borrowing
Fast-forward to 2018, and jump to an entirely different vertical – financial services. What shifts are happening within the borrower experience? What expectations exist that, if not met or exceeded, may lead to the traditional lender’s demise?
Look at the next generation of borrowers. What’s important to Millennials, and behind them, Gen Z? How should credit unions with a desire to grow their lending portfolios in the digital era be planning now to provide what borrowers want?
Let’s take a look at three of the emerging expectations consumers have of players in the lending universe.
1. Speed. For the most part, consumers expect the lending process to take several days. But that’s changing – quickly. Millennials are buying their first homes in a marketplace of popular apps that advertise during the Super Bowl and pump out a steady stream of quirky social content. Can your members buy a home or refinance a mortgage in minutes? If not, you’d better be able to clearly articulate your difference, or perhaps more smartly, get yourself in a position to accelerate that lending cycle dramatically.
2. Technology. The 2018 Borrower Insights Survey released by Ellie Mae found 70 percent of Millennials surveyed used an online process for all or part of their last mortgage application. And while the survey also indicated Millennials value face-to-face interaction with their lenders, it’s certainly not needed for every step. Take the appraisal process, for instance. Do consumers really need a human appraiser when real-time automated valuation models (AVMs) work (and, importantly, satisfy regulators)? Are you taking full advantage of the technology, connectivity and data available inside the credit union space? How else will you deliver that high-tech borrower experience digital consumers want?
3. Altruism. Millennials want to do business with companies that do good. Seventy percent are willing to pay more for a product that makes an impact on issues they care about. This is certainly in the credit union wheelhouse. Are you capitalizing on that by promoting the alignment of the credit union philosophy with the borrower’s preference for do-gooders?
Speed. Technology. Altruism.
These three expectations alone signal great opportunity for credit unions willing to listen to what borrowers are already saying. Those that become great at telling the credit union story while also mobilizing the technology to say “yes” to an applicant faster will be in the best position to remain relevant in a digital world.
By paying attention to what matters most to members – young and seasoned – and not looking for evidence that supports your own preexisting theories, you will safeguard your credit union from becoming the Blockbuster of lending.
About the Author:
Omar Jordan has more than 15 years experience in the loan origination business and has launched multiple successful lending companies and technologies. He is an active member of the Iowa Mortgage Association, the Iowa Credit Union League, the National Notary Association and the Mortgage Banking Association. Prior to founding LenderClose, Omar was a top producer at HSBC Finance where he was recognized on a regional and national level with multiple top flight and president’s awards. Omar enjoys family time with his wife and daughters, in addition to giving back to the community.