How to Build Trust With Open, Collaborative Lending

by David B. Coulter

If you spend any time at all on social media, you’ll see countless memes about the lengths to which people will go to avoid leaving their home and having to deal with people. That’s one of the reasons for the recent boom in online shopping and home delivery services.

Online lending and algorithm-driven mortgage applications seem to form an obvious outgrowth of that trend, but home-buying is more complex than ordering takeout. Consumers not only can but should play a role in the process, and greater collaboration with mortgage brokers might even be the future of the industry.

Automation Can Be Problematic

In theory, automated lending sounds good. If your clients are used to doing everything on their phones or laptops, completing a mortgage application through an app or website might seem easy and intuitive. It’s fast, friction-free and doesn’t require them to leave home.

In practice, the effect can be unsettling. The automated loan algorithm is essentially an unaccountable “black box” into which aspiring borrowers enter their data and hope for the best. It’s almost like asking a Magic 8-Ball “Can I get the mortgage I want?” — and it’s no more satisfying.

Checking the Data

A deeper problem is that the algorithms are only as good as their code and the data sets used to train them. In real-world settings this creates the potential for unconscious bias to creep in, distorting the decision-making process. Amazon’s attempt to use AI for bias-free hiring blew up spectacularly, leading the HR field as a whole to re-examine its use of the technology.

The same is true for AI in the financial industry. Any given applicant may be affected by unconscious bias in the algorithm created by the data sets used to train it. The end result is AI that may not comply with existing laws against discrimination, creating the potential for future litigation against those lenders and — sadly — heartbreak for some potential borrowers in the here and now.

The Human Touch

The shortcomings of AI-driven lending will be hotly debated for the foreseeable future, but the clear outcome is that humans are still important — and possibly vital — to the lending process. Consumers have little reason to trust in automated lending, but they’re also not equipped to navigate the mortgage market themselves. It’s simply too complex for laypeople to understand thoroughly after a few days of Googling.

In a 2018 research paper aimed at the credit union industry, the Filene Research Institute observed that 21st-century consumers “want to improve their credit and start investing responsibly … but they are confused and exhausted sorting through the numerous complex options that pop up on Google.” The institute’s suggested response to that need was relationship-driven human advice, which it termed “concierge banking.”

A similar banking survey by PwC showed that younger borrowers were more likely to turn to non-bank lenders, who already account for a large and growing percentage of the overall mortgage market. Surprisingly, and suggestively, more than one in five respondents to the PwC survey said they’d prioritize a positive experience over getting the very best rate.

If your business model consists of being the human who offers that positive, relationship-driven experience, these findings are very good news.

Building Customer Loyalty

For any financial professional, the ideal position is to be seen as a trusted mentor: Someone who can demystify the complexities of the industry and provide useful, actionable advice. Your clients arrive at your door with a great deal of uncertainty, spoken or unspoken. The more rapidly you can build a relationship with them and achieve a position of trust, the sooner they’ll be comfortable giving you their business now and in the future.

Trust-building works best when you’re able to position yourself as a collaborative member of “team client,” rather than a random salesperson whose motives may be mixed.

Enter ScoreMaster

ScoreMaster works perfectly as a way for consumers to manage their daily finances. It prompts users to manage their money in a way that’s score-focused. The simple reality is that most people leave credit-score points on the table simply by not knowing how to optimize the things they already do for maximum impact on their score.

In a credit-driven economy, that means they’re hurting themselves. An improved credit score means they’ll find it easier to get the loans they need on more favorable terms. This is especially true for a home mortgage, the biggest loan most borrowers will ever take on.

Introduce ScoreMaster at First Contact

Your best chance at maximizing every borrower’s potential comes from introducing ScoreMaster as early as possible, ideally at the first meeting. In real-world use, borrowers using the ScoreMaster app improved their scores by an average of 60 points over just 20 days. That’s a brief enough interval to work within most house-hunting scenarios, as long as you start the process immediately.

Present it as a benefit you offer to every potential borrower. If you already have the borrower’s credit score, point out the difference in the loans available at the current score and at one that’s 60 points better. If you don’t have the borrowers’ score, you can use a few typical examples you’ve prepared in advance. The difference should be striking enough to get their attention and bring them into the ScoreMaster family. It only takes about a minute to sign up.

How to Build Trust With ScoreMaster

For brokers, a crucial aspect of ScoreMaster’s approach is that it’s collaborative. In that initial session, you and your borrowers will draw up a road map to move them from their current credit position to one that meets their goals. Once they’ve committed to that plan, ask them to share their plan with you in real-time. All they need to do is add your email address and you’ll be “CC’d” on the parts of their financial life that mark milestones in their plan (their private, personal financial information remains private and personal).

With minimal effort, you’ll be in a position to cheer their successes and encourage them when they struggle. For anyone in a financial negotiation there will be a feeling of “us versus them,” and this collaborative approach puts you squarely in the “us” category.

ScoreMaster also enables you to be more collaborative with your lenders. It’s common to refer to a credit score as a “snapshot in time” of the applicant’s financial standing. With ScoreMaster it’s analogous to a video rather than a still photo because you can see the financial picture evolving in real-time. With that information in hand, you and your lenders can assess — and know in advance — when they’ll qualify for the loan you want to make.

Accountability Matters

It’s a recognized aspect of human nature that we’re more diligent about doing the things we should when there’s someone checking on us. By embedding yourself in the borrower’s financial plan you aren’t just building trust; you’re bringing accountability to the process. Simply knowing that you’ll see their results helps keep your borrowers focused on their goal, and that’s a good thing.

ScoreMaster takes that a step further by providing in-app recognition and rewards for meeting goals and doing the right things. In software-engineering circles that’s called “gamification,” and it works surprisingly well. Just like the likes, shares and retweets that drive engagement on social media sites, the app’s reward system reinforces the behaviors that reward your clients.

Also, it’s just plain fun. Any prospective client who’s ever played a game can relate to “running up a great score,” and in this case success has real-world benefits. If your borrowers have a competitive streak, you might even plant the idea of seeing whether — or by how much — they can beat the 60-point average credit score increase. If they send referrals to you with a challenge to “Beat that!” — that’s even better.

Getting on Board

In short, while automation in lending has a superficial appeal, its shortcomings make it vulnerable to competition from well-equipped, well-prepared brokers. You don’t have to be a champion salesperson to draw a distinction between an opaque, mysterious “black box” scenario and one of open, transparent collaboration.

By empowering your clients and giving them a sense of control they won’t get elsewhere, you position yourself perfectly as the insider helping them navigate the unfamiliar landscape of lending. By actively taking part as they raise their score and improve their financial wellness, you’ll build an automation-proof business.

*Legal Disclaimer – ScoreMaster is a patent-pending educational feature simulating credit utilization’s effect on credit scores via payments or spending. Your results may vary and are not guaranteed.

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by David B. Coulter Mar 30, 2020, 04:28 PM

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