Article | 4 min read

Digital lending leads the way

How to meet growing customer expectations as digital lending diversifies.

By Lilia Krauser, Staff writer

Last updated November 22, 2022

Since smartphones were first introduced in the early 2000s, digital platforms have dramatically changed the way banks do business. Neobanks like Starling Bank and Nubank have redefined the financial sector—and most traditional banks now offer digital services.

Founded after the upheaval of the 2007 and 2008 financial crisis, neobanks—also known as challenger banks—have no physical branch locations, offering their services exclusively online. These upstarts offer a variety of digital services that customers love, like investment and budgeting apps. Many also offer checking and savings accounts—at much lower costs than traditional banks.

In order to compete, traditional financial institutions are increasing their use of technology. Last year, JPMorgan Chase launched digital consumer banking in the UK under the Chase brand.

“The UK has a vibrant and highly competitive consumer banking marketplace,” Gordon Smith, CEO of consumer and community banking and co-president of JPMorgan Chase said of the digital bank launch. “We’ve designed the bank from scratch to specifically meet the needs of customers here.”

With the increasing popularity of online banking platforms, both traditional financial institutions and neobanks are expanding their offerings with digital lending. But with customer expectations at an all-time high, there’s no room for error. Fortunately, there are proven strategies that can help make your bank meet the digital moment.

What, exactly, is digital lending?

Digital lending is similar to traditional lending, except that instead of a customer going to a physical bank and dealing with a human banker, the loan process takes place entirely online.

Lending Service Providers (LSPs) generally operate in collaboration with non-banking financial companies (NBFCs). These companies disburse credit to customers using the LSPs’ platform—and customers can use either a mobile app or web platform to apply for a loan or make payments.

Bank customers love that they can look at their phones—and quickly find out whether or not they qualify for a loan. Instead of writing a check and mailing in payments, customers can make payments with just a few clicks. This technology not only improves the customer experience, it provides significant cost savings for banks.

Cut operational costs

During a financial downturn, it may be tempting to slash spending across the board. But taking a more judicious approach to cutting costs can be just as effective. Customer service is one area where you can actually increase CSAT scores while trimming the budget.

Zendesk’s research shows that 69 per cent of customers prefer to attempt to solve their own problems before reaching out for support. And companies can reduce customer support costs by 25 per cent or more when a proper knowledge management system is in place.

For financial institutions that want to make the leap into online lending without breaking the bank, providing better service through self-service is essential.

Grow revenue

Neo Financial, a neobank based in Canada, has experienced rapid growth since its founding in 2019. Valued at more than $1 billion, Neo Financial serves its million customers with spending, saving, investing, and rewards programs on a user-friendly digital platform.

As the neobank continues to scale, Shannon Burch, Neo Financial’s Head of Experience, plans to grow revenue by building a CX team that actively listens to clients. Neo Financial’s agents are trained to concentrate on the individual needs of clients while demonstrating empathy. And during interactions, key data is gathered to improve future experiences.

“We look for outliers and where we can evolve our training program so that [agents] get better at certain areas,” explains Burch. “That’s how we evolve the business, versus leaving it up to our specialists on the phone to be the ones that control and make those decisions. Instead, they can just focus on the customer and deliver great experiences.”

Turn your agents into inside sales reps

With more and more financial transactions taking place online instead of inside a branch, customer expectations for exceptional service have skyrocketed. According to Zendesk’s CX Trends 2022 report, 61% of customers say that they would switch to a competitor after just one bad experience.

This is where CX agents have the opportunity to shine. Customer relationship management (CRM) technology is a powerful tool, allowing agents to use customer data to create a personalised experience. And a software solution like Zendesk Suite not only allows your team to effectively answer customer inquiries, it helps deliver the kind of customer experience that can turn a support interaction into a revenue generating opportunity.

Providing great customer service in digital lending can lead to repeat customers, referrals for new customers, and increased upsells.

Retain your customers

For many banks that are expanding online operations, it can be a challenge to personally connect with customers. But developing customer loyalty can pay big dividends—increasing customer retention rates by just 5 per cent can boost profits by more than 25 per cent over time, according to research by Bain & Company.

To learn more about how Zendesk can help transform customer service in your business, visit zendesk.co.uk.

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