02/15/2018

Using Data Analytics to Drive Lending Opportunities in a Rising Rates Environment

Kesna Lawrence February 15th, 2018
Categories
Marketing Insights

Times are changing for lending organizations, and it’s not by their choice. With the Federal Reserve raising rates last year by a quarter-point three times in six months, and more increases planned for 2018, the lending environment is rapidly changing for banks, credit unions, and other lending organizations. The status quo isn’t good enough. What should financial organizations be doing differently in 2018 with this change? Here are some recommendations:

Focus on different products

With rates on the rise, bankers need to seek new strategies because the lending landscape is shifting.

Refinancing was strong when the rates were low. Refis represented approximately 80 percent of loan applications. But now that the rates are creeping up, home prices are approaching pre-recession levels in some parts of the country. What that means is, homeowners have their equity back. They’re not looking for a refi. They’re looking to use that equity for home improvements or debt consolidation.

Take your spotlight off refinancing and shine it on purchase mortgages (which now represent 65 percent of loan applications), second mortgages, home equity lines of credit, auto loans and personal loans. That’s where the greatest opportunities lie.

How do we find the customers who can benefit most from these financial products? The answer to that is in the data and how you use it.

Use data analytics

U.S. companies spent $20.2 billion gathering third-party audience data and data activation solutions in 2017 to support their advertising, marketing, media sales, and associated efforts, according to new research from Winterberry Group.

Big data is redefining virtually every aspect of the banking industry, loan opportunities included. Data analytics helps you to locate and target the right people for offers for financial products by picking up on signals based on their behavior, life events, and even passive data alone.

Behavior-based signals are concrete actions consumers take that indicate they’re ready to purchase a new financial product. Online searches are one of the most powerful signals. Searching for a Realtor? Chances are you’re in the market for a mortgage. Hard credit inquiries? A credit hit means a consumer is considering a purchase, like a new car or a home. Pick up on that signal and boom, you’ve identified a potential customer for a mortgage or a car loan.

A child heading off to college, the birth of a baby, an adjustable mortgage rate resetting or an auto lease expiring are event-based signals that the consumer is about to experience a financial shift that will produce new financial needs like a college loan or a car loan.

A consumer’s data alone builds a profile of predictive signals. This passive data could include a large amount of money sitting in a savings account or debt that could be consolidated. These triggers indicate they might be a good candidate for a consolidation loan or the purchase of a CD.

Banks can use this data to identify consumers with a low rate who might be in the market for a second mortgage or personal loan, identify renters who might be in the market to buy a house, or target homeowners who are paying off their mortgages.

How it works in practice

Oftentimes, you can use a combination of all three of these types of signals to get at an opportunity. Here’s how it works:

How do you capture this data? Deluxe Marketing Solutions can help with that. We offer a program called In-the-Market Alerts (ITMA), which tracks consumer signals for you. Pick a product you’d like to focus on — mortgages, say. Do a trial using inquiries from credit bureaus and other predictive data to identify mortgage shoppers who match your qualifying criteria. Just pay per consumer record with no commitment or contract. See the kinds of results you get. You can use ITMA as a standalone service or in conjunction with other marketing programs we offer.

So, then what?

You’ve got the data on their behaviors, events, or even passive info; now how do you capitalize on it? The going trend out there is to use an omnichannel approach: Ads, targeted direct mail, social media, targeted online advertising, email offers, etc.

The key to remember here is relevancy. It all boils down to personalization. Data analytics gives in-depth insights into customer behavior, so banks can target customers and potential customers with marketing campaigns that are relevant and timely. Personalized product offerings, just when your consumers need them. By offering ways to meet their needs before they’ve even voiced those needs, you’re creating a powerful relationship with your customer, who feels understood.

On the flip side, nobody likes irrelevant offers. Not only are they an annoying turnoff, they can do more harm than good. Stay away from blanket offers that cover a wide swath. What you want is a targeted message to reach the right customer, one customer at a time.

In this changing lending landscape, Deluxe has you covered. For more information about using data generated by behavioral-based, event-based, or passive signals, download our whitepaper, Lending Strategies to Help Banks Thrive in a Rising-Rate Environment.

This content is accurate at the time of publication and may not be updated.