Fuelled by the pandemic, the consumer finance and lending landscape has changed dramatically in recent years. The demands of today’s tech-literate population are higher than ever, and consumers expect a streamlined end-to-end payment experience.

With Direct Debit often used as the default payment method, are lenders missing out on an opportunity to grow their customer base and increase conversion by failing to offer alternative payments methods as part of their collections strategy?

Given the uncertainty of the current financial landscape, coupled with the shift towards greater consumer protection and a focus on Consumer Duty, lenders now have a unique opportunity to reimagine their collection techniques.

CUSTOMER-CENTRICITY

With huge challenges facing UK borrowers, lenders should possess a high level of understanding of their customers’ needs and preferences across every channel. When serving borrowers of all ages and payment preferences, the ability to offer payment methods including digital wallets, payment links and Open Banking can help appease a multi-generational customer base.

CARD PAYMENT

By setting up a Continuous Payment Authority (CPA) lenders can vary payment amounts and the date when payment will be collected. CPA also allows for speedy settlement and live data enables strategic decision-making about borrowers in real time.

In line with Consumer Duty, this means lenders have a greater chance of ensuring a successful outcome. Handy solutions like Account Updater can also be used in parallel with CPAs to ensure that customer card information held by lenders is automatically updated, optimising success rates and reducing admin time.

DIGITAL WALLETS

The convenience and security of digital wallets including Apple Pay and Google Pay makes them an excellent option for ad-hoc collections, particularly for lenders serving a younger customer base. Apple Pay can also be used to tokenise card details for CPAs, making the onboarding process highly efficient.

OPEN BANKING

Working with a Payment Initiation Service Provider who is authorised to initiate payments directly from customers bank accounts through Open Banking can be transformative for lenders. From a customer perspective this means payments can be authorised efficiently and securely, and from a lender perspective this helps save costs on transaction fees, particularly when dealing with high average transaction values.

CONCLUSION

When lenders attempt a collection for the first time through a CPA, if the payment fails due to insufficient funds, rather than retry the same method, they could then send a link with the option to pay via Digital Wallet and PayByBank. By allowing borrowers to choose which account they make payments from, or to immediately let you know they’re struggling to pay, not only provides great customer service but also improves customer retention and reduces admin costs.

Acquired.com offer alternative payment methods including Pay By Bank, Card payments and Digital Wallets. Get in touch if you are interested in diversifying your payment strategy.