In a challenging environment, the credit industry is being forced to continually evolve and cope with the trading conditions. Although volumes of new lending are more stable, the credit industry faces a complex risk environment and must evolve to cope with the new ‘normal’ trading conditions.
We are seeing radically different patterns of financial behaviour as well as new sources and styles of competition. Inflation has hit household budgets hard; many people are looking for credit to plug gaps in what are now smaller and less predictable household incomes. The industry is also facing a relentless rise in application fraud.
The unpredictability of the housing market, the need for significant deposits and the fact that incomes have struggled to keep pace with inflation, has understandably created a climate of caution amongst potential first time buyers whose entrance to the market would boost activity at all levels. We are also seeing more lifestyle renting from people with sufficient means to buy a home.
To succeed in this environment, forward thinking lenders are intelligently reducing risk, becoming more efficient and offering an increasingly personalised service. They are using data to make quick and accurate decisions based on a complete understanding of each customer’s situation.
Matching techniques are enabling them to source relevant data from across their businesses and supplement it with trusted external sources of information.
In addition, new ways of assessing affordability are helping lenders deal more appropriately with those finding it increasingly difficult to maintain their commitments.
These approaches also position them well to capitalise on a future upturn. Those who are succeeding are being innovative in how they use data to quickly and reliably assess the person’s situation, identify what they need, what they can afford and whether the lender should offer it.
We believe that is key in succeeding in today’s diverse financial services marketplace.
How are you adapting to the new ‘normal’ and what are the most significant challenges ahead for you? Please leave us your comments below.