Digitalisation has changed how we live. As consumers, smartphone convenience has left us impatient — expecting to instantly do things at the push of a button. But how do these consumer expectations translate to applying for credit products, and does application process time affect customer loyalty or openness to other products and services?
At TransUnion’s recent 2020 Hong Kong Financial Services Summit, Francis Lau, Director of Research and Consulting, Asia Pacific, presented ideas on the matter. In his session — Optimising Turnaround Time to Drive Origination Growth — he examined the correlation between account opening processing time and customer loyalty, and suggested potential improvements for a better customer experience.
Recent innovations in finance and digital banking have become commonplace in Hong Kong. Yet, account opening turnaround times at financial institutions vary greatly. Considering credit cards and personal loans as examples, same-day turnarounds — from enquiry to account opening — only accounted for 27% of the total turnaround time distribution. TransUnion data also shows periods of 15 days and above making up a significant portion of the turnaround time distribution for credit products. So, why such a large discrepancy in turnaround times, and is there any correlation to borrower risk segment or the type of lender.
One surprising observation is personal loan borrowers — with scores below-prime — experience faster turnaround times: over half experienced turnaround times of two days or less. Lender type is also an important factor, as non-bank lenders tend to have shorter turnaround times for personal loan products and credit cards. Interestingly, the wide variance in turnaround times exists for both banks and non-bank lenders — and demonstrates a long overall turnaround time related to systems and processes used by different institutions.
In quantifying the impact of turnaround time on customer loyalty, Lau referred to the super prime segment of credit cards issued by banks — making up the majority of issued cards. Research shows 69% of top-of-wallet cards were opened within a week of application, where higher annual spend is linked to shorter turnaround times.
For personal loans, Lau analysed the account opening behaviour of below-prime customers with non-bank lenders. In this case, personal loan loyalty was measured by whether consumers opened another account with the same lender within 18 months. Here, results showed faster turnaround time creates loyalty — where 69% of borrowers (in the same-day turnaround time period) opened another product with the same lender.
Aside from faster turnaround times, technology can help lenders build greater customer loyalty. For example, by using existing customer data, you can tailor relevant offers for increased efficiency of promotional campaigns. Another scenario is employing pre-filled forms for existing customers to save time while using APIs to automate the onboarding process and boost sales.
To explore the analysis and insights from this session, you may watch the on-demand recording and download the presentation materials here. Contact your sales representatives or click here for password.
To learn more about using technology to increase efficiency of your onboarding process, click here.
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