Equiniti argues that lenders are making a mistake by not focusing attention on applicants who have been declined, because it means losing out on a potential revenue stream, harming customer relationships, and wasting the resources expended in the initial assessment.
“At the point at which a customer is declined credit, lenders have a real opportunity to turn a negative into a positive, for everyone involved,” said Sarah Jackson, director of Equiniti Credit Services.
“When the lender declines an applicant, they turn away a potential customer about whom they have already collected a wealth of information,” she continued.
“Commonly, this data is abandoned and the lender’s attention is redirected to new applications, the viability of which cannot be determined until the lender has committed resources to processing them. This is inefficient to say the least. The lender is voluntarily putting itself back to square one.”
Moreover, being declined multiple times can damage a person’s credit score, which could in turn trigger a cycle of falling credit scores each time they apply, making it more and more difficult to qualify for credit despite their financial circumstances remaining unchanged.
“Instead of losing the customer, lenders should focus on identifying alternative loan products,” said Jackson, “ideally from their own portfolio, but also from other lenders as needed.”
“Doing so will enable them to maintain their customer relationship for the future and, at worst, leverage an introducer’s fee. At best, they will achieve a full conversion with a different product of their own.”
By creating an effective declines management system, Jackson posits that lenders can increase customer retention, secure a new revenue stream and save on costs.
“Turning a ‘no’ into a ‘not that loan, but how about this one?’ is surely a more attractive and commercially viable proposition,” Jackson added.
“With the right technologies, an attractive and affordable alternative product can be quickly found, so both customer and lender can walk away happy.”