Indirect loans have become more popular in the last decade, and this type of loan can generate substantial loan portfolio growth for banks and credit unions. Typically, a financial institution contracts with a business to originate loans at point of sale (or a third-party vendor connects them). A common indirect lending scenario is an auto loan. A car dealership and FI will develop a relationship so that when someone wants to purchase a car they can apply for an auto loan at the institution the car dealership suggests.
In this article, we’ll explore the indirect consumer journey with your institution, and we’ll share some best practices to convert people whose loans are about to be paid off. Many FIs find it difficult to convert “one-and-done” consumers into lifelong connections, but these strategies can help your FI leverage its consumer experience, implement smart campaigns and cultivate long-term relationships.
Building the Relationship
Although indirect lending can increase your loan portfolio, some of these loans aren’t very profitable because indirect consumers don’t engage with other products, and the relationship has a set end date. If someone is looking to purchase a car, they will only be focused on finding the right auto loan. However, this person may need another financial tool in the near future, and this is where your FI could help.
It’s important to engage and convert these borrowers into lifelong clients before their loan is paid off. Through thoughtful communication and using the consumer data you have access to, your FI can build upon these relationships from the onboarding phase throughout the life of the loan so you don’t have to keep watching these relationships end.
Best Practices
Building trust shouldn’t begin at the tail end of a loan. All consumers, whether direct or indirect, should be offered exceptional service. To ensure they have a positive experience, you should designate team members to communicate via emails or phone calls. You don’t want to overwhelm people with messaging, but these check-ins can help you gain a better understanding of the consumer to see what they might need down the road of their financial future.
At the beginning of your relationship, it’s standard to send payment reminders to customers/members, but you can also offer educational resources based on the loan they have with you. This is an opportunity for your FI to establish itself as a trusted resource and can be done by providing financial advice or a link to a relevant blog post that applies to their situation. As time progresses, you can send more personalized emails that are based on the consumer data and interactions you have. The mobile/online banking experience they interact with should also be as frictionless as possible so they don’t run into any problems with user experience.
Some people will be more engaged than others, and you can communicate with them more frequently. If you’re looking for the best offering that will prevent them from leaving, take the time to consider their individual needs. By targeting the right person at the right time, they won’t feel like you are pushing or selling financial offerings.
Your FI can implement marketing campaigns that are tailored to specific consumers or segments, whether it’s telling them about a similar loan, a rewards program, or financial products/services that will directly benefit them. All of these interactions are building blocks that help you shape a more holistic picture of your consumers and help them see you as an institution they trust. By using these best practices, you can build lasting long-term relationships.
With a solution like Prisma, you can harness your data and implement high-performing marketing campaigns. See what Prisma’s marketing automation software can do for your financial institution. Visit Prisma’s blog posts for more useful marketing tips and strategies.
Image credit: Adobe Stock