Creating a lending environment with "friction-right" experiences while being inclusive of fair customer outcomes

Created by
Andrew Duncan
February 17, 2021

The world of loan origination is constantly evolving, and recently we've been involved in a debate about how much friction there is in the lending journey for consumers. The Woolard Review discusses how innovation can reduce friction; however, it highlights the need to provide adequate friction to ensure consumers understand the products they are using.

Firstly, it’s fair to say that Short Term High-Cost Credit Providers have been good at reducing friction but very poor from an inclusive and fair outcomes perspective. Our view is that community-based lenders, such as credit unions, are the complete opposite. They’ve got a great grasp of the creditworthiness of people that may pass under the radar of mainstream lending but generally deliver their loans with long turnaround times and lots of paperwork.

Consumers need your products as their means-to-an-end (resolve a problem situation, buy something new etc..) and are less concerned about the process under-the-hood. That is, of course, unless there's friction! Our connected society has made consumers come to expect answers 'now.'

We've been working on this with credit unions for the last few years. We've brought the “friction-right” part of the equation to the market so they can offer a 10-minute loan safely.

For consumers, this is a win-win

  • They quickly know if they will have access to cash  
  • They get the slick experience of a digital-first lender  
  • They get fair pricing  
  • They get the education to improve their overall financial literacy and well-being  

The technology is key here. Overall, it's about the lender having a digital platform with a hub that is connected to several different touchpoints and front-end experiences. For instance, depending on the type of customer and perhaps where they are on their financial journey, they might be best suited to speak to an operator or for the majority, as we find, access your services digitally on mobile and web.

This suits a large proportion of consumers too as it considers those who are perfectly comfortable with applying for credit, understand their credit score and those who have less financial literacy, perhaps haven’t had a lot of credit in the past or know they’ve had problems in the past. Also, it touches on another point raised in the Woolard review about not leaving non-digital consumers behind. This being something credit unions are already very good at.

We hope that with credit unions' adopting our technology that consumers will have a desirable lender to solve their problems with - the need for High-Cost Short-term Credit diminishes.

To help Soar deliver this, we've partnered with Experian to integrate their Decisioning Platform as a decision support system for our clients to make appropriate lending decisions with the right data and insight but also in a scalable and affordable way.

We think it’s also worth considering that "friction-right" isn’t "friction-less". This is the lenders’ opportunity to provide education to the consumer throughout the loan origination process:
  • It’s particularly important to ensure the consumer knows what they’re applying for and the consequences of this  
  • and using a platform like this to educate the applicant as they’re approaching the outcome. You could, for instance, run a soft credit check on an applicant to guide them through the likelihood of a positive outcome before harming their credit score and incurring the associated costs.  

So, with the right friction, you can provide safe lending to your customers and prospects with high levels of automation, insight all while reducing the overall cost of origination. If you're interested in knowing more about how Soar is delivering this please contact us or arrange a demo.

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