Lending business can be summed up in two sentences: I (customer) need money. You (Bank) give money and charge interest.
But lending isn’t so simplistic! Consider the permutations-
‘I need money now, but you will give after 4 weeks.’
‘You are reluctant but may give loan with 110% security. I don’t have it.’
‘You give money but not as much as I want. I sulk but still take from you.’
‘You offer loan at lower rate, but I still don’t take it from you. I don’t believe you.’
‘You offer me much, but I still take only partially from you. I still need my old bank to continue.’
If Amount, Rate and Security (ARS) were the only defining features, loans could have been easily categorised as simple bank products. But customers behave differently with different banks, even for the same loan. Bankers, of course, behave differently with different customer and with much more rigour.
Often, customer pays higher rate but won’t shift banks easily. But may quickly shun the bank along with the relationship manager. In essence, for customer loan isn’t only about ‘what/how much will I get (product)’ but also about ‘who is giving it (service)’. It goes beyond ARS. Loan is in effect a ‘bundle of services’, money included.
The approach of building a ‘Product Program’ by setting a feature list, parameters and eligibility criteria, is akin to manufacturing a mobile with many features. However, its crucial to broaden the perspective and instead think about providing a complete package to the customer. This may include finer points
- Openness to support related activities
- Relationship ownership through a RM and not IVR
- Flexibility in setting a repayment date
- Benefit of falling interest rates
- Availability of short-term support when needed
- Ensuring no emotional ‘blackmail’ for buying insurance
In short, commitment to take due cognisance of customer needs, timely support, fair business practices are common sensical, but oft ignored articulations that transform ‘loan as product’ to ‘lending as a service’. It can’t be ‘buy and forget’.
But then services require deeper commitment. Everyday. Is it required when ‘you’ are giving money?