The economic crisis, triggered by the pandemic, has left millions of people needing credit at a time when banks are tightening lending standards.
The result? A lose-lose situation, where the consumer gets a credit decline and a horrible experience, and the bank loses a potential customer.
The customer experience: Bait and insult
Let’s break the credit decline experience down.
Ironically, the consumer is usually encouraged to apply. The application process involves baring one’s economic soul (your income, key expenses). For some credit products, such as home loans, the application and documentation are highly invasive and involved, requiring time and thoughtful inputs by the applicant.
The credit decline process, on the other hand, feels blunt and insulting. The applicant receives a form decline letter with little to no advice on actions the applicant can take to improve their credit strength. It is no wonder that when I talk to banking executives, they tell me that credit declines receive a rock-bottom Net Promoter Score (NPS) score of -50 or even worse!
How do you recover the customer and turn it into a win-win for both the bank and the customer?
Why is credit decline advice an opportunity?
Simply offering personalized coaching improves customer satisfaction scores.
In my current role, I meet with dozens of bank and credit union executives a month to discuss their sales and advice customer experiences. One executive recently shared that simply offering personalized coaching to customers, regardless of whether they used it, increased his group’s customer satisfaction score by double digits.
Converting credit declines to approvals is a business case winner.
Wells Fargo’s 2018 annual report highlights the business potential for post-credit decline coaching. The bank spotlights how its team of financial health coaches worked with a customer whose application for a secured credit card was declined. By the end of the coaching process, the customer’s situation had improved so much that the family realized its dream of home ownership, utilizing a Wells Fargo mortgage (of course). The benefit side of converting credit declines to approvals is clear. The cost to do so, however, has been the roadblock. AI-powered coach bots, described below, change the equation.
To increase competitive advantage, you need to provide experiences.
That means building relationships that include financial advice. A J.D. Power study noted that of 58% of customers who desire digital advice from their banks, only 12% receive it. Yet when customers do receive advice (and are satisfied), 91% report a high level of trust in their bank (Source: CMO by Adobe).
If you don’t provide advice, someone else will.
While wealth clients get personalized advice, retail banking customers are usually on their own for managing their financial journey. “With 93% of people looking elsewhere for financial advice, there is a huge untapped market for banks to provide advice using digital channels as consumers need it.” (Source: CGI)
AI-powered coaching: Quality advice at scale
Today’s AI-powered engines can create an advice experience that rivals what the best bankers deliver. AI is now powerful enough to create personalized advice for consumers, laying out the exact steps needed to improve credit scores. Since the advice is automated, it is scalable, always compliant, and costs only pennies per interaction, which cannot be said about a banker team.
These AI solutions can be made even more powerful when they follow best practices for financial coaching.
- Bite-sized action steps: Advice is most effective when offered as brief steps to gradually nurture customers and avoid overwhelming them. This approach gives the customer the confidence to keep going on their long-term financial journey.
- Plain language: Conversational AI tools work best when they deliver advice in friendly, easy-to-understand language that’s free of bank jargon.
- Behavioral nudges: AI solutions can include an arsenal of A/B tested best practice nudges that help customers make progress on their action plan. These nudges make a coach bot more like a human coach, providing motivational reminders and celebrating progress. For example, a digital coach could hold the customer accountable to take an agreed action, e.g., reminder to pull their credit report, and make it easy to follow through by sending a quick access link.
- Gamification: A digital coach can incorporate motivational fun challenges and rewards like contests, badges, gift cards and other strategies.
The AI powered coach bot represents a business imperative for today’s economy and beyond. AI gives you the power to exceed customer expectations and help you differentiate and expand market share.
Transforming the current credit decline experience is the perfect starting point.
This article was first published on BAI.org.