Category: Banking Financial Services

As the holidays approach, many people find themselves in a financial bind. If you’re among them, you might be considering a loan to get you through the season. As you explore your options for Christmas gifts and travel, you may come across lenders advertising “Christmas loans”—though these offers should be approached with caution. Should you get one this holiday season?

What is Christmas Loan, and how does it work? 

A festival loan is a type of personal loan offered by online lenders and credit unions during the festival season. It can be a secured or unsecured loan, depending on the lender’s requirements. Borrowers’ terms and eligibility are determined by a variety of factors that vary by lender, including credit and income. To receive the most competitive interest rates, borrowers need to have good credit scores.

Some lenders require a minimum credit score, whereas others don’t check your credit at all. Lenders that don’t require a credit check typically charge high rates. In fact, these no-credit-check Christmas loans are essentially payday loans with fees equivalent to interest rates of 400% or higher.

If you decide to take out a Christmas loan, it’s important to shop around for lenders and find the right one.

Are Christmas Loans worth it?

A Christmas loan can relieve some financial stress and give you some peace of mind this holiday season. At the same time, though these loans are often easy to obtain and fast to process, they don’t provide a long-term solution. The Consumer Financial Protection Bureau (CFPB) states that consumers who take out an unaffordable payday loan often end up taking out another one to pay it back, thereby getting stuck in a debt trap.

Things to consider while shopping for a Christmas loans

Check your credit: Before taking out a loan, it’s useful to know what your credit score is and what’s on your credit report. The stronger your credit, the better rate you’ll likely get on a loan.

Keep up with payments: Christmas loans are instalment loans, and you will need to plan for this in your budget and be sure you can afford the payments.

Fast funding option: If you choose an online lender, generally the application and funding process is quick and easy and can receive the loan the same business day.

Check multiple lenders: Compare multiple options before choosing a lender so you can find the best rates and terms.

Pros and cons of Christmas loans

Before getting a Christmas loan to cover your holiday spending, consider these pros and cons

Pros

  1. Fast funding
  2. Some loans don’t require a credit check
  3. Short-term loans with fixed payment line
  4. Fast and simple loan application

Cons

  1. Potentially high interest rates
  2. May be a payday loan
  3. Could lose collateral 
  4. Expensive fees

Nutshell

If you find yourself spending more than you can afford, try taking out a Christmas loan. However, before you take on debt, it’s important to understand the potential risks, like high fees and interest. If you find yourself spending past your means, check back in with your budget as a reminder of what you can afford this year. By setting limits upfront, you may be able to make it through the holiday season without carrying debt into the new year.

digital collection 

While financial enterprises have been in the digital race lately, the industry hasn’t been able to efficiently leverage technologies in default management and subsequently improve efficiency and customer experience. With rising inflation and interest rate increases , loan delinquency has also increased at an alarming rate. With delinquencies on the rise, lenders need to transform their contact approaches now to suit customer preferences.

Solution is  Going Digital.

As the evidence for a deteriorating credit cycle mounts along with increasing losses, lenders can take steps to increase institutional resilience. By strengthening collections capabilities and embracing digital communications, they will be better prepared to address any further increase in delinquencies that may occur.

Traditional collection challenges

Traditional collection is driven by focus on delinquent accounts. Led by aggressive targets, the priority is to ensure the repayment of as much of the outstanding debt as possible. Traditional debt collection methods may be putting the relationship with the entire portfolio of delinquent accounts at risk due to lack of understanding of customer behavior and inaccurate risk segmentation.

In most cases, the intensive collection strategies are just measures to overcompensate for unknown and perceived risks posed by the ever-increasing delinquent portfolio. At the core of this problem is the inability to identify risk accurately. This is a big gap and the reason for the phenomenon, primarily, lies the inhibitive cost of conventional methods of risk modeling that a lot of times overweighs the returns. Additionally, there are costs associated with model governance and maintenance of the model.

Top challenges: 

  1. 1. Lack of customer data
  2. 2. Increased burden of regulations
  3. 3. Failure to track and reconcile accounts
  4. 4. Inability to execute

Despite the trend, many lenders are still focusing on the old ways of doing things. During the last recession, some firms even added staff to make more calls. Now a digital approach is needed.

Digital collection transformation

In response to rising delinquencies, shifting consumer preferences, and the current regulatory environment, leading financial institutions have begun a journey of digital transformation in collections. Develop a digital collections strategy that addresses a future-state customer experience journey and defines a set of required capabilities and investments across people, process, and technology to support that strategy. 

Elements of a digital debt collection transformation

Customer Segmentation: Design modeling that leverages multi-dimensional risk factors, customer personas, and activity insights to drive optimal strategies

Personalization: Rules-based prescriptive and personalized messaging with call-to-actions and proactive marketing of payment relief offerings

Digital Capabilities: Communication channels, including SMS/text, email, chat, online banking/app alerts, and outbound automated interactive voice response (IVR), can help exceed today’s customer expectations

Reporting and Analytics: Performance dashboards, predictive analytics, and classification modeling that supports testing, decisions, and competency improvements for holistic transformation

Process Optimization: Process automation and workflow designs that accelerate performance and long-term customer loyalty and retention

Act now

Even with a sound plan of action , many institutions will lack implementation capabilities, leaving collections operations extremely vulnerable. By failing to digitize their collections operations, these institutions risk potentially crippling losses in a future downturn. Prioritize and act now. By strengthening collections capabilities and embracing digital communications, your firm will be better prepared to address any further increase in delinquencies that may occur.

Being risk positive with Insight Consultants 

Insight Consultants solution can help firms identify customers in different risk categories early in the cycle and follow up by creating personalized resolution strategies, considering the financial disposition and behavioral aspects of the borrower. This will help in striking an early deal, thereby reducing the inconvenience and hassle the customer go through. We can help achieve the balance between alleviating risks and elevating customer experience and create an edge over the competition using digital collection strategies.

Let’s Talk, Insight Consultants can support your digital collection needs.

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Customer experience plays a crucial role in any business. However, many companies worldwide fail to prioritize the customer at the center of their operations. Instead, they focus on leveraging new technologies to streamline processes and cut costs.

To truly transform the customer experience, it is essential to gain a deep understanding of customer preferences and priorities. The recent economic downturn, triggered by the pandemic and resulting financial shocks, has compelled businesses to reevaluate the fundamental aspects of customer experience.

The lending industry faces similar challenges. Merely offering low interest rates is no longer sufficient to attract and retain clients. Lending firms and banks must actively personalize the customer journey at every stage, encompassing initial interactions, onboarding processes, loan origination, and more. The lending industry can build strong relationships and drive sustainable growth by taking proactive steps to enhance customer engagement.

 

How can businesses successfully transform their customer experience to get results?

 

Tech-savvy customers today expect convenient access to funds anytime, anywhere. They demand streamlined processes and have little patience for time-consuming, manual procedures. However, many lending firms still rely on outdated legacy back-end systems built decades ago. These systems result in inefficient, paper-based workflows that significantly impact the customer experience.

To improve customer loyalty and drive growth, businesses must go beyond traditional services and embrace digitization. By digitizing their operations, lending firms can meet customers’ needs for convenience while unlocking numerous opportunities for growth, both in terms of revenue and cost savings.

Research indicates that 35% of business executives credit digital transformation for better meeting customer expectations, while 40% acknowledge improved operational efficiency. Additionally, 38% of executives plan to increase their technology investments to gain a competitive advantage.

By actively embracing digital transformation, lending firms can enhance customer satisfaction, optimize processes, and position themselves as industry leaders in a rapidly evolving landscape.

 

Here are 4 steps in which digital transformation needs to happen to impact the customer journey in a positive way.

 

Define digital strategy: The business world is face-paced due to rapidly changing technologies and innovations. Even established companies are being disrupted every year by evolving and advancing technologies. Companies need a plan that not only outlines which technologies need to be adopted but also protection from digital disruption. That’s why understanding your core systems and processes to identify opportunities is critical before harnessing the potential of digital transformation.

 

Re-imagine customer journey: With customers gaining control over the way companies deliver experiences, it’s time to build new experiences that meet their demands. Businesses looking to improve customer experience during the first interaction should consider collecting data and documents in digital format (digital onboarding)

 

Omnichannel strategy: Customer expectations are changing rapidly, and they expect to be able to transact digitally on any device and the experience to be connected across all channels. Implementing an effective omnichannel strategy is a powerful weapon for businesses to win customers who demand convenience and simplicity irrespective of the kind of electronic devices or physical channels they use. Firms need to introduce a single platform that manages most (if not all) of the channels

 

Personalization: Today’s customers actively look for relevant inputs that might either improve their financial health or help them make smarter decisions, causing wellness programs for finance and financial management tools to increase in popularity. This has led to the integration of data sources to reduce documentation, personalize pricing, and make the overall process experience more effective. 

 

In fact, lenders are now using digital tools to unlock varied forms of customer interactions and services previously not accessible to borrowers. Customer data, combined with machine learning, helps personalize the offerings and delivers effective customer-centric communication at the right time.

 

Top benefits of adopting digital mode

 

a. Improve operational efficiency

b. Meet changing customer expectations

c. Improve product quality

d. Increase design reuse

e. Reduce product development cost

f. Introduce new revenue streams

 

Digitization isn’t just doing the same thing in a better way, but rather creating something new. It implies an end-to-end process of developing and delivering data-driven financial products that are applied for, disbursed, and managed through the digital channel.

 

The new, digitally conscious customer

 

Truly understanding customer needs may help firms improve not only the buying experience but also their bottom line. In an environment that becomes increasingly globally competitive, service quality is an important measure of customer satisfaction, which ultimately leads to customer loyalty. Today’s customer has zillions of alternatives, and bad customer experiences will certainly make him switch to better avenues to serve his needs. 

 

Hence, retaining your loyal customers and attracting new customers can only be possible by providing seamless and personalized experiences, and making them a top priority every time. The need for an intuitive, frictionless digital borrower experience is increasingly becoming the key to lenders’ success.

 

Through digitization, you can potentially expand your business, likely increase the number of customers who will stay with you, and help ensure your business is profitable long-term.

Have you started digital transformation yet?

 

Find out how Insight Consultants can help you in your digital transformation journey by Contacting Us

The world is staring at an economic downturn due to the severe health and financial shocks inflicted by the pandemic and the massive economic disruptions triggering the Russia-Ukraine war. The current economic scenario has the potential to send some FinTech firms into hypergrowth and others into ruin. Global inflation is continuing to rise, but what does this mean for FinTechs? Navigating inflation is a big challenge to Fintechs, and how can they overcome it? 

 

Traversing through an inflation

 

Several countries are now going through what the experts call – stagflation, which is a mix of low growth and high inflation. It can be a mixed bag for fintech companies as they are involved in different activities like lending money, buying equipment, and more. The reality is no one exactly knows how to navigate a modern inflationary environment.

 

Inflation effect on fintech

 

Decreased confidence from investors: Fintech companies are ever reliant on investors to grow and expand their businesses. Unfortunately, the risk of inflation will call for bigger demands on investment returns and lower company profit.

 

Increased borrowing from fintech: With rising costs due to inflation, fintech companies remain essential in providing loan services to small businesses and individuals

 

Increased spending on equipment: Fintech has been essential in storing and moving money through the technologies and/or infrastructures they develop. Due to current events, however, profits from these services have been affected.

 

By focusing on fundamentals and drawing the right balance between being conservative and bold, fintech players can cushion the impacts of inflation.

 

Navigating Inflation: strategic preparedness to face the storm

 

Inflation in 2022 has the potential to send a few fintech’s into hypergrowth and others into ruin. Interest rate hikes and the end of quantitative easing are inevitable, as the Federal Reserve has signaled, to combat a 40-year high in inflation. Firms need to Implement a strategy that works to address different economic landscapes. Inflation could lay waste to many fintech’s in 2022 unless they act now.

 

Moves Fintech firms need to make to prepare for the possible coming storm

 

Do more than just provide a service: Help your customers achieve positive financial outcomes that outweigh better interest rates. Leveraging personalization, automation, and predictive analytics to help customers be more financially successful will give your firm a competitive advantage than other competing banks and fintech’s. Shortcutting the laborious processes of opening accounts or applying for loans is also a huge selling point.

 

To be cautious and invest in long-term fraud control measures: An economic downturn invariably leads to an increase in NPAs. With a jump in the number of defaulters, fraudulent transactions and suspicious activities become prevalent. Investment in long-term fraud control measures is a must during an inflation.

 

Improve pricing practices: Companies must adopt more dynamic pricing practices. Using AI understand the pricing opportunities. Use Artificial Intelligence to predict their customers’ willingness to pay and understand the gap to current prices.

 

Tap the un-banked sector: During an economic depression, large banks lend only to customers with high credit scores. Fintechs can aim at the underbanked community and get the lion’s market share.

 

Exploit the possibility of new acquisitions: Firms which are not adequately capitalized come under significant cash pressures and become available for a takeover. Exploiting the opportunity and acquiring those businesses can provide an inorganic boost to the top line and access to new proprietary data.

 

Communicate effectively to customers: Like any other change, price adjustments need a strong change management process enabled in order to achieve maximum effectiveness. A clear rationale for the price increase needs to be developed and the sales team needs to be appropriately enabled to ensure this rationale is communicated effectively.

 

Navigating Inflationary Challenges and Seizing Opportunities

 

Companies with the right tools and systems to make informed decisions on time will outperform their competitors. Organizations that use AI have greater visibility into customer and product profitability, allowing them to analyze data more frequently and implement more targeted price increases. This enables them to device change more quickly, increasing their chances of successfully navigating inflationary periods.

 

There is both an ocean of opportunity for the industry and some challenges ahead while navigating inflation. With the current crisis, fintech’s future and sustainability rely on its response, especially for smaller firms that would have to push for continued innovation amid rising costs. While a recession is always perceived as unfortunate for the larger market, by addressing the challenges at hand and exploring newer possibilities, fintech players can do well for themselves and the economy.

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