How to build trust as a lender
Disrupted by new technologies affecting customer behaviors and preferences, trust in traditional financial institutions is gradually dwindling. Yet, the significance of trust only grows with the ubiquity of the internet. Incumbent banks struggling to adapt their services and business models to changing market conditions are losing consumer trust and brand relevance.
An Edelman report shows that confidence in financial institutions has slowly declined over the last three years. Financial institutions were, in fact, the least trusted industry, far below tech, healthcare, and energy. Moreover, according to a recent EY report, consumers aged 65 and over are the only age demographic that trusts traditional banks more than fintechs. Every other age group trusted fintechs more, and the younger the demographic, the broader the trust gap.
Consumers, influenced by experience in other tech realms, expect financial services to meet their needs seamlessly. Banks find themselves facing an uphill battle to gain and retain customers. As banks lose the trust of customers, it becomes increasingly difficult. The data supports the trend, as pre-pandemic, only 6% of US consumers named a fintech as their primary bank. By 2021, the number skyrocketed to 31%. The longer banks wait to act, the steeper the climb will get. It is a game that banks can quickly lose to nimbler fintechs and big techs eager to build their financial service offerings.
These trends pose a significant threat to incumbents but an unprecedented opportunity for smart fintechs, putting the financial services industry at a crossroads. The fundamentals a traditional bank built its reputation around — longevity, institutional heft, and branch networks — are not enough for today’s consumers.
Why is trust important for lenders?
Trust is essential to consumers, especially when it comes to financial matters. People want to feel confident that their money, data, and privacy are safe. When entering into a relationship with a bank, consumers are often entering into a multi-year partnership. They want to feel comfortable. In fact, consumers value trust and good service at least as much as cost and convenience when choosing a finance company.
Yet, consumers don’t trust FI’s the way they used to. Trustpilot found that 50% of consumers had experienced a decrease in trust in financial service providers over the last three years.
So with a trend of rising distrust, trust becomes even more crucial. In this environment, meeting consumer needs and delivering delightful customer experiences will boost the bottom line. There is a unique opportunity for fast and innovative fintechs to leverage technology and increase consumer trust.
Designing for trust in lending
Trust is in every aspect of every touchpoint of a brand. The most fundamental trust you can build doesn’t start with corporate transparency but before that. It begins with smaller-scale design decisions. Minor design details convey confidence to a user. Design for trust runs through every touchpoint you have with customers, from having a simple website to using straightforward language in contracts and even the way employees interact with customers. If even one of these aspects is off, people wonder if a product or service is up-to-scratch and whether the lender is legitimate.
Design cues are significant for building trust in lending. Manual and unintuitive onboarding correlates with lower conversion rates; people abandon tasks when they have to do offline work or do not know how to proceed with an application. What does this say about a lender’s security if the onboarding process is frustrating and inefficient?
Transparency for trust in lending
Transparency is essential. Transparency cannot be skipped when it comes to building trust in lending. Hidden fees can destroy trust as many consumers will want to know they can afford to borrow money before they do it. They will want to see the interest rate, how much the fees are, and other specific charges. Providing this information in an easy-to-understand format before the loan is issued is reassuring. An FI that hides extra costs to portray its products as cheaper than the competition will take a hit to its reputation.
The mortgage lending application process, in particular, is rarely smooth. Lenders often require additional information, there can be much back-and-forth, and circumstances can change before a loan is granted. Providing customers with basic FAQs gives them a more realistic perspective on the process, some of the challenges that can pop up, and what they can expect an answer. This information is incredibly reassuring as mortgages deal with so much money.
Walking to the talk to build trust in lending
Walking the talk is closely related to transparency and clear communication. Yet, nothing destroys trust, like promising to do something and not living up to that promise. How often do we see customers complaining on social media to a business that has said it will do something and has not followed through? The FIs with the highest trust ratings usually have a culture that values honesty and strives to deliver on their pledges.
Developing a culture that values honesty and clarity is essential. It is vital to be transparent, tell people if something cannot be done and why, and then deliver on the things you can do. This is not a quick fix, but it will pay off in the long run.
Summary: how to build trust as a lender
Banks have been discussing meeting customer needs for years, but few have embraced the change required to achieve it. In this new environment, with high trust in technology, a lack of loyalty to any financial institution, and a mistrust of traditional banking, it is still possible to use trust as a significant competitive advantage. Lender’s competitive edge lies in creating trust through embracing technology, staying more agile, and focusing on customer needs.
Smart lenders understand that trust is hard to build and easy to destroy. Trust runs throughout all touchpoints with your customers, from website design to transparency in agreements. Most importantly, it is essential to living your values. Building trust with consumers will come naturally if everyone in your organization understands the importance of trust and believes in this value. This way, trust will run through customer journey mapping, KPI, and UX.
The shift in consumer expectations and expectations is an opportunity for lenders willing to rethink their strategic approaches. If you want to learn how our technology can help you on your journey to building trust, book a demo today.
Subscribe
Get insights into the latest developments in a fast-evolving industry with Näktergal’s newsletter.
