Speeding up the second charge market

As a leading lending platform committed to continually improving our customer service, Freedom Finance understands that adopting fintech is central to growing our business, not only through an improved customer experience, but in speeding up the whole process, from initial enquiry to finalising a deal.

Related topics:  Special Features
Josh Bowe | Freedom Finance
10th November 2020
Josh Bowe Freedom Finance
"Efficiency doesn’t just just mean lower costs, but a better customer experience because – especially in this market – fast, effective responses drive demand and conversion."

The traditional back and forth via phone, email and courier, between lender, broker and customer, to process and finalise a loan already seems out of place in an age marked by quickly evolving technology.

And when the focus is the second charge lending market, where loans are typically more complex than first charges and require additional due diligence, then speeding up the process can go beyond subtle savings in efficiency – to reducing customer drop-off rates and providing a genuine competitive edge.

But how much could technology help? We were keen to explore a better end-to-end solution so together with innovative technology specialist Nivo, who recently formed the Second Charge Lenders Technology Steering Committee – we conducted research into the length of a traditional deal.

The analysis showed that a traditional second charge loan without fintech was completed on average in 22.4 days. It was a process ripe for revolution. Nivo’s identification and verification fintech could take eight days off the onboarding process and four days of lag due to email back and forth could be removed by an innovative business-to-business digital messenger service. A beta version was delivered by Nivo within five weeks of the steering committee’s inaugural meeting.

At Freedom Finance, efficiency doesn’t just just mean lower costs, but a better customer experience because – especially in this market – fast, effective responses drive demand and conversion.

We’ve found a customer’s mindset on an unsecured personal loan is about needing finance with some immediacy, whether that’s to pay off credit cards, buy a new car or pay for home improvements. Occasionally, they’ll even sacrifice the best rate in order to get the finance quickly.

At Freedom Finance we typically transacted around 95% of our business over the phone. The process necessitated a credit check, a call-back for a phone survey and couriered paperwork that needed to be filed. Due to security and compliance restrictions, email didn’t cut it, and additional postage costs could be added to 10-minute phone consultations.

We found that up to half of customers were lost at the initial call-back stage and asking for wet signatures and mailing documents was also increasingly being seen as an imposition by digital savvy customers.

As my colleague, operations manager Jim Winchcombe points out, customers are reluctant to put their original ID documents in the post if they believe they might need them back within a few weeks. He said: “Remember when we could go on holiday? No one wants to put their passport in the post to a company to apply for a loan when they might be going abroad the following month. You have to remember that a typical customer might apply for a car loan on a Friday with the intention of purchasing at the weekend. We need to try and bridge that gap to meet customer expectations.”

Partnering with Nivo addressed that issue head-on. The identification and verification, and e-signing processes offered on application through the Nivo app can negate the need for couriers and fact-finding phone calls. The applicant’s identity is confirmed in seconds with Nivo’s biometric technology. It’s a safer, smoother mobile journey with the customer in control. They decide when and what data to share when ready, the broker then has the information in one place to make a decision.

Fifty per cent of customers opt to download the Nivo app to complete their applications rather than plump for the traditional call-back option – and the numbers that want a digital-only process are increasing.

In becoming the first broker using Nivo’s new business-to-business messaging service, we were able to overhaul our B2B messaging processes as well. The service enables lenders and brokers to securely message each other through the course of a case and share key customer evidence such as biometric ID results, e-signed agreements, payslips and bank statements, with the information available in one easy-to-follow conversation trail.

For us the convenience is valuable. When a lender is looking at a customer, they might need more evidence of affordability. They would previously email us hoping the original agent is available. But that individual might be looking at another case and jumping from client to client is both time consuming and increases the risk of mistakes. Now, as soon as a lender asks a question via the Nivo B2B channel, the information is there and any agent that’s available will know exactly what the lender needs.

Jim believes it’s helped us to streamline that entire process as he explains: “Our people have more time to focus on the more complex side of lending or underwriting, or they can concentrate on more customers. In any given day, they can handle up to four times the amount of cases just based on their jobs being quicker and easier. Short term, we’ve already seen benefits, but longer term it will significantly reduce operational costs and also means the relationship with our lenders improve because we can address their needs faster. It was great to see it immediately embraced. Ask a lender previously to abandon some of their ways of working and they might have looked at you with horror. But if Nivo is the alternative, a lot of them have just jumped on it.”

You only have to look at the early results and they already show how effective Nivo’s ID passporting has been between us and lenders such as Optimum Credit and United Trust Bank. Leads are up, call times are down, and immediate underwriting issues are far fewer. It has reduced deal times by more than eight days and raised the loan conversion by 4%. We estimate we can reduce our courier costs by £24,000 a year and process almost twice as many loans.

Although Covid is creating uncertainty, At Freedom Finance we believe the future looks brighter – and faster. There’s a huge opportunity for more technology integration. Lenders are starting to remove emails from their company processes and their customer journeys, so if we can streamline the integration and it’s designed well, I’m convinced we’ll start to see the snowball effect of this technology benefit the whole second charge sector.

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