Turn Credit Declines Into A Win-Win

The pandemic has left millions of people needing credit at a time when lending standards are tightening. The result is a lose-lose situation: consumers receive a negative credit decline experience and financial institutions miss out on a lending opportunity. How can this be turned into a win-win?

Start by deconstructing the credit decline process: Most consumers are first encouraged to apply for a loan or credit card. The application process can be invasive, requiring significant time commitment and thoughtful and accurate inputs from the applicant.

After all that, many consumers are declined with a form letter or message that has little to no advice on what actions they can take to improve their credit worthiness. It’s no wonder that credit declines receive a poor Net Promoter Score (NPS) of 50 or, often, much worse. But on the flip side, forward-looking institutions could use this opportunity to provide post-decline credit advice. This is a compelling opportunity for several reasons:

• Improved customer satisfaction. One financial institution learned that simply offering personalized coaching, regardless of whether or not consumers used it, increased their customer satisfaction by double digits.

• More future lending opportunities. Post-decline financial coaching can help prospective customers position themselves for future borrowing needs, even beyond the product for which they were initially declined.
• Increased trust. Quality financial advice helps build trust. A J.D. Power study found that, of the 58% of customers who want advice from financial institutions, only 12% receive it. When consumers do receive helpful advice, more than 90% report a high level of trust in their financial institution.

Provide cost-effective, high-quality advice
Virtual coaching tools powered by artificial intelligence can help banks turn declines into opportunities. These coaches can deliver step-by-step guidance and personalized advice experiences. The added benefit is easy and consistent compliance, enabled by automation. These AI-based solutions are even more powerful when they follow coaching best practices:

• Bite-sized simplicity. Advice is most effective when it is reinforced with small action steps to gradually nurture customers without overwhelming them. This approach helps the prospective borrower build momentum and confidence.
• Plain language. Deliver advice in friendly, jargon-free language.
• Behavioral nudges. Best-practice nudges help customers make progress on their action plan. These nudges emulate a human coach, providing motivational reminders and celebrating progress.
• Gamification. A digital coach can infuse fun into the financial wellness journey with challenges and rewards like contests, badges and gifts.

Virtual financial coaching, starting with reversing credit declines, represents a huge market opportunity for banks and their customers. Learn more about the industry’s first virtual financial coach.