Josh Lehr: Retail Lending vs. Direct: Leveraging Multiple Channels to Create Customers for Life


PERSON OF THE WEEK: Mortgage lenders have made great strides in delivering a seamless all-digital mortgage experience. Lender adoption of technology to facilitate a “contactless” mortgage process has rapidly accelerated due to the pandemic.

But just because a lender is successful in delivering a great, all-digital customer experience when originating a first mortgage via the direct channel, how does that stack up against the experience delivered by the same lender – such as a refinance or a home improvement loan – through a retail channel? 

As Josh Lehr, director of technology alliances at Total Expert, tells MortgageOrb, delivering a consistent, unified customer experience across all lending channels is eternally challenging. No matter what channel, he explains, lenders need to understand their potential borrowers.

Q: Why is digital lending attractive to modern borrowers?

Lehr: Throughout the first half of this year, a record number of consumers jumped on historically low interest rates to purchase new homes or refinance existing mortgages. As borrower demand increased, so did their desire for a digital lending model — especially after the COVID-19 pandemic limited their ability to meet with lenders face to face. 

And we don’t expect digital lending to go away. The next generation of homebuyers consisting of tech-savvy Millennials and Gen Z will expect fast and easy digital financial transactions, including home buying and applying for a loan. Not only are these consumers looking for a simple process, they understand that they can shop and compare multiple lenders to find the best fit for their financial situation.

Q: How can lenders with both retail and consumer direct lending build meaningful relationships with their customers across channels?

Lehr: Lenders should eliminate data silos and foster collaboration between their lending channels. Often lending channels are separated by an impenetrable barrier that divides their mortgage enterprise data among lines of business. When this happens, customer insights aren’t connected and opportunities for personalization are missed, creating a poor customer experience with the brand.

This leads to customers feeling devalued. For example, they might have a close relationship with a loan officer after securing a home loan through the retail channel, but they’re identified as a new lead when they utilize the consumer direct arm to refinance. After sharing all their personal data and trusting a lender with one of the largest investments of their lifetime, these customers expect to transition seamlessly between channels both during the origination process and throughout the duration of their loan.

It’s also important for lenders to connect content and cadence across channels for a unified and consistent experience. These “Three ‘C’s” are the most critical elements of the customer experience, which first-time homebuyers said was the most important factor in their decision to choose a lender. By tailoring relevant communication by channel, lenders can drive customer retention, increase lifetime value, and develop meaningful relationships with their customers beyond the first point of contact.

Q: What are some unique challenges of consumer direct lending, compared to retail lending?

Lehr: While direct-to-consumer lenders have an advantage over retail lending with the next generation of homebuyers who tend to prefer digital transactions over in-person interactions, consumer direct lending isn’t without its challenges. For one, it will become increasingly difficult to get homebuyers on the phone – which they relied on in the past. With increased regulations around spamming consumers and heightened consumer awareness and expectations, being the fastest to dial won’t be enough to close loans, let alone create customers for life. 

Another always present challenge for consumer direct lenders is driving a great purchase experience for consumers. Without a strategy to build and maintain a strong relationship with the consumer over the extended purchase cycle, the online lender is likely to lose the deal to a lender in the consumer’s local market.

If they aren’t equipped to deliver messages that strongly resonate with customers – over the right channel, at the right time – consumer direct lenders risk losing business to more savvy competitors that take the time to understand their customers, then optimize communications with them over their preferred touchpoint channels.

Consumer direct lenders have also relied on purchasing leads from various online lead sources to drive business. An increasing number of lenders are realizing this is where their consumers are shopping, which is building a more competitive landscape. It will be more important to deliver value to consumers at each and every touch to build trust and stand out from other lenders.

Q: What prevents lenders from meeting customer expectations?

Lehr: At a foundational level, many lenders don’t have a great strategy in place to ensure new opportunities get the proper amount of attention. A great strategy to drive first call and SMS doesn’t mean you’ve done the best to capture that business. Lenders need to have a strategy to drive communication and outreach through multiple channels and over time to make sure they are present when and where the consumer is ready to talk. 

No matter what channel, lenders need to understand their potential borrowers and their existing customers, and deliver value based on their needs. When lenders aren’t able to derive customer insights from data and put those insights to use through automated outreach and personalization, it prevents them from delivering a seamless and humanized customer experience, whether that’s in-person through the retail channel or online through consumer direct.

Often a disjointed array of sales and marketing technology bolted together is hindering lenders from extracting those proactive insights and preventing them from orchestrating the ideal customer journey. In the past, there hasn’t been a solution that unifies lead management, CRM, and marketing for a holistic view of the customer and their needs to effectively meet their expectations.  

Q: What do tech-savvy customers expect from a consumer direct lending experience?

Lehr: Tech-savvy customers tend to rate the quality of their experience based on three key elements: speed to response from an additional inquiry, degree of personalization within each communication, and quality of service throughout the entire process. These borrowers typically fall into the younger demographic: Millennials and Gen Z. According to March 2021 research, more than a third of these younger borrowers said they would be comfortable buying a home online. And their numbers are growing: this group will make up 25 million new households by 2028.

In theory, this group isn’t asking for the world. They just desire a digital homebuying experience that mirrors other online purchase processes in their day-to-day lives. And that doesn’t stop at the first point of contact or even after the loan is closed. Lenders need to find ways to build trust and drive value after the loan closes so the consumer feels comfortable coming back when they’re ready to buy their next home or refinance their existing loan.

The lenders that develop a complete understanding of their customers, then tailor their experience based on their preferences and needs, will have the success in delivering a consumer direct lender experience that meets the expectations of the most tech-savvy customers. 

By effectively utilizing customer information at their fingertips, direct-to-consumer lenders can make data-enabled, genuine connections with their borrowers from the first interaction. Throughout the lifetime of the loan, that initial connection will serve as a springboard for lenders to stand out as their most valuable contact in today’s competitive digital lending environment.

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