San Francisco-based Blend, which claims to offer market-leading digital lending technology that makes the process of acquiring a loan simpler, faster, and safer, recently shared key insights on “reframing relationship banking for an increasingly digital world.”
Fintech firm Blend, which recently acquired $300 million in a Series G round, notes that consumers’ requirements and expectations are constantly changing.
Blend explains that the traditional “ideal” of relationship banking tends to encourage lenders to be a “constant presence” for their customers across all of their financial goals or objectives. Instead of just a series of “isolated” exchanges and transactions, relationship banking aims to prioritize “ongoing engagements” and “customer loyalty” over a lifetime, Blend added.
The Blend team writes in a blog post that imagine there’s a customer named Sarah. Since she opened a checking account more than five years ago, Sarah has applied for an automobile loan when her family needed a bigger car and a credit card as well. Now Sarah and her partner are planning to remodel their home and she comes to you for advice or recommendations on whether she should apply for a personal loan or home equity loan.
Blend notes that beyond simply describing a really loyal customer, this serves as an example of relationship banking because the lender is “focusing on Sarah’s needs — not just selling her a product.” However, what do we really mean when we use the term relationship banking? And how can banking service providers do it a lot better as their interactions with customers shift to all-digital platforms? Before getting into their approach to “milestone-based” lending, Blend explains how relationship banking is “typically understood.”
For many leading financial institutions, relationship banking isn’t really about selling, but more of solving problems or addressing requirements. Blend explains that “in staying with each customer as they meet their financial goals, bankers seek to both strengthen customer loyalty and increase demand for their loan products.”
The Fintech firm adds:
“Instead of beginning with the product in question (checking account, line of credit, or mortgage), why not start with what you can solve? Need to remodel?”
For instance, as with Sarah, the solution could be a HELOC or home equity loan — or something completely different.
But, many banking services providers tend to struggle to put a relationship banking “strategy” into place and “execute it well.” Blend teamed up with Forrester Consulting to look closely into the present state of milestone-based lending “demand” and related strategies. The survey revealed that 85% of lenders “believe personalized product recommendations are important,” however, just 38% are “currently optimized to provide them to their customers.” Although personalized product recommendations are only one part or aspect of milestone lending capabilities, it’s an “important indicator,” Blend claims.
The Fintech firm further noted:
“At Blend, we prefer to think about relationship banking as milestone-based lending. Rather than rates and features, we shift the focus to the needs consumers have throughout their life. Important life events — like relocating, getting married, starting a business, or adding to one’s family — often bring changing financial needs.”
The Blend team also mentioned:
“Financial institutions have long helped customers navigate achievements, aspirations, and adversities. But the traditional approach must now evolve and improve as digital disruptors enter the market and customers have an increasing number of options.”
During this “unique time of fluctuation,” Blend’s survey with Forrester Consulting revealed that clients “respond” when banks provide “highly relevant value as they experience key moments in their life — 74% of respondents believe it’s helpful to know how financial products can help them adjust to their life’s milestones.”
Milestone lending is “quickly becoming the standard for building better relationships with consumers,” however, this has to be translated to a “more digital” environment in a post COVID world, Blend explains.
The technologies, channels, and methods lenders are using to link up with their clients are always changing. This means there are some lenders who might be asking or wondering how they can “foster the same kind of lasting relationships that define in-person banking experiences.”
Blend also noted:
“Financial institutions will need to ensure that their entire line of products is easily accessible digitally — at any time and place. In addition to access, customers expect high-quality experiences that are seamless across devices and channels. A consistent, familiar experience across lending products provides the customer with a sense of reliability similar to the steady presence of their banker without requiring one-on-one time.”
Carrying the “same standard of excellence” that clients expect in person through to an all-digital environment may lead to more “positive results,” Blend claims.
The Blend team adds:
“Milestone lending helps customers feel like their needs are understood and met. Rather than a purely transactional relationship, they have a trusted partner throughout their life events and financial decisions. And with better digital experiences, customers can access new products from wherever and whenever they’d like.”
If done well or properly, financial services providers will be able to take advantage of this key opportunity to further strengthen customer relationships while expanding their line of products and services. As it begins to extend beyond physical bank branches, milestone lending offers “a level of service that earns loyalty and builds stronger relationships over time,” Blend claims.