The technologies that thrill online personal lenders

Although customer satisfaction is generally highest among people who apply for loans in person rather than online or over the phone, two online lenders challenge this norm. One, Goldman Sachs’ Marcus, topped JD Power’s recent personal lender rankings. Another, Upstart, came in seventh out of 22 (the ranking only reflects borrowers who recognize Upstart as a lender). American Express, which ranked third, also appears to be enjoying a boost in satisfaction from advances in technology.

“This in-person ability to ask questions, probe, understand need and make recommendations resonates with clients,” said Craig Martin, Managing Director and Global Head of Wealth and Lending Intelligence at JD Power, explaining the general preference for human loan officers. .

JD Power’s 2022 Consumer Loan Satisfaction in the United States Study found that personal loans were “filling the void left by pandemic-era relief efforts,” with customers being attracted by the competitive rates, easy access and variety of options; a July study by the company found they were most often used to pay off debt and supplement income due to lost wages. Experian found that the number of personal loan accounts grew 16% over the past year, while TransUnion reported in August that the number of consumers with credit cards and personal loans had reached record highs in the past year. second quarter of 2022. In credit unions, unsecured lending grew 13% in the first six months of 2022, compared to 0% annual growth in the first six months of 2021, according CUNA Mutual Group.

An overview of how top performing digital lenders work can be instructive for both bank and non-bank lenders. For example, lenders with the most satisfied customers often use artificial intelligence and machine learning to speed up processes. They provide online application forms that prioritize what matters most to customers, such as loan amount and monthly payment, rather than asking for customer information upfront.

Mark is an example of the latter.

Martin says a colleague at JD Power tried to get a personal loan from his local bank and was discouraged when told to go online or make an appointment.

“He went to see Marcus and it was easy, quick and simple,” Martin said. “Even after he completed the process, they came back with follow-up communication on when his payment was due.”

Ilya Gaysinskiy, global head of engineering for Goldman Sachs’ consumer business and head of the consumer and wealth management platform, attributes customer satisfaction to a few things, one being the design of the application.

“We did a lot of research to figure out what resonates the most,” Gaysinskiy said. For example, the bank has found that customers want to know how much they will pay per month. Registration begins by asking applicants to select the loan size they are looking for and the approximate monthly payment they are aiming for. Then he enters personal information such as name and annual income.

“We look at it from a client-centric perspective, or what they’re trying to achieve, versus what information we need to get the loan approved,” Gaysinskiy said.

Another is the call center, which is staffed around the clock. Agents aim to respond to all customers within 30 seconds.

“It continues to build confidence,” Gaysinskiy said. “On the one hand, there’s a modern digital experience. On the other, there’s the peace of mind that a human is a phone call away.”

Assets received emphasizes speed. The company relies heavily on artificial intelligence and machine learning to approve and underwrite loans.

“Upstart executes the application approval process well, including how quickly people are approved,” Martin said. Customers with lower credit can expect rigorous application review with more documentation required, but Martin finds Upstart provides a more seamless experience that exceeds customer expectations.

Michael Lock, senior vice president of lending partnerships at Upstart, says the application takes an average of five minutes to complete and each applicant gets an instant credit decision. It also says that 73% of loans are instantly approved and fully automated without applicants having to send in any documentation.

“They’re a good example where technology plays a key role,” Martin said.

Lock credits the machine learning models that Upstart has been honing for about eight years. About three-quarters of the decision is made using traditional credit data, but Lock says Upstart digs deep into credit data, “not just the loans I have and payment history,” a- he declared. “Traditional models look at a very small subset of data in credit files.” Another quarter of Upstart’s credit decision relies on alternative data, including the candidate’s education level and occupation, to make predictions about employability.

“There was some controversy that we used the education factor – ‘you just want to lend to people who went to Harvard and Duke’ – but the model looks at the average income levels of an outgoing student” , or a recent graduate, Lock said.

The company has also used artificial intelligence and machine learning over the past four years to verify certain details to ease the burden on customers to back up their claims with documents such as W-2s. Typically, Upstart relies on third-party databases to verify that, for example, the annual income an Oklahoma nurse enters in her application matches what third-party sources record for the same job and same place.

“By connecting to the databases, we can perform this verification in real time in 73% of cases,” Lock said. For the 27% of loans that cannot be verified digitally, Upstart favors digital methods of uploading documents, such as asking the applicant to take a photo of a document with their phone instead of emailing a PDF .

“Email is the new snail mail,” Lock said.

American Express, which makes its personal loans available to consumer cardholders only, allows customers to verify pre-approval by logging into their accounts. Most cardholders know if they’re approved within minutes, said Kristen McGinnis, vice president of U.S. personal loans at American Express. The company also pre-fills the applications.

“American Express is ahead of the curve because it knows the customer, knows their needs, and can position an offer appropriately based on that customer’s behaviors and habits,” Martin said.

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