Existing loan books to reopen

Consider the divide between current lending volumes and the amount of existing loans and it’s apparent that those firms who get their legacy strategy right can expect returns, says Julian Wells, director of marketing, HML

The last two years have seen the lowest new lending figures for a generation £140bn this year compared with over £360bn at its peak in 2007. Big players have merged, famous brands have disappeared and new firms have entered the market.

But at the same time total UK mortgage lending stands at £1.2 trillion.

Within this total there are millions of customers with mortgages and loans from brands that will never see the light of day again. These declining assets still have to be managed according to the current regulatory regime, and those customers need to be provided with the right experience to pave the way for cross-selling opportunities in the future.

Not only that, but the lenders behind these mortgages still have the infrastructure that goes with all those brands. Lenders face the reality that many of their existing customers will be serviced through legacy systems that exist on different, inherited, incompatible or unfamiliar systems. This makes the task of managing them, keeping all of the customers happy and giving them consistency of service, an even more daunting one.

The opportunity created by consolidation
Consolidation in the financial sector has seen jobs lost, offices closed, and famous brands removed from the High Street. But it hasn’t all been bad news for everyone. The big consolidators have numerous legacy portfolios and this is opening up massive opportunities for lenders and outsourced servicing providers alike.

The management of these consolidated lending institutions know a multitude of brands, products and customers can still deliver profit for their organisation, but only if they have the infrastructure, processes and technology in place.

And as they plan their future operating models, more and more lenders are weighing up how best to take on this challenge across their portfolio. We’re constantly talking to lenders about how they can achieve various objectives; including decommissioning existing systems, outsourcing the servicing of difficult products, freeing up internal resources for other work, and outsourcing rather than investing in existing operations and systems.

The key underlying consideration is that although legacy accounts cost money to run, these customers are often no less valuable to the lender, and indeed, they can be more valuable than other customers, depending on the products they hold. So it makes sense to optimise the operational platform used to service these customers to boost their profitability to an organisation.

And it can often be more cost effective to outsource the servicing of such portfolios, rather than undertake a major project to migrate them onto one system.

Why customer experience is key
Customers’ expectations of the service they receive from financial institutions continue to grow. And they won’t care that they are part of a legacy book, their expectation of a continuously improving service isn’t determined by the internal procedures of their lender, rather the environment in which it, and its competitors operate.

There is a certain element of operational progress that people take for granted and not keeping pace doesn’t reflect well on a lender or a brand. The operational processes that can deliver a real difference in customer satisfaction are evolving rapidly, and grabbing it by the horns will be key to success.

Customers do business with financial services companies through many different channels, but the risk is that the experience for them can often be disjointed and inconsistent. It is therefore vital to make sure that every channel of communication contact centre, website, Interactive Voice Response (IVR), written materials and other correspondence is consistent with the perception an organisation, or brand, strives to create.

This is a particular challenge for those lenders operating multiple brands from multiple platforms, or indeed using multiple platforms to operate a single brand. Inconsistency creates customer confusion and frustration, or even worse, customers who abandon you for the competition.

Operational design for success
Technology today is an enabler it’s the way you design your operation that can give you the competitive edge and lay the foundations for success.

Good technology is an expectation. And so is a certain level of quality, reliability and flexibility. In order to deliver this and provide a truly great customer experience, you need to have the processes and controls in place to deliver. That’s why operational design is so important in today’s market, and is more central to the success of an organisation’s ability to delight its clients and customers than the systems that underpin its operations.

Best of class operational design comes from first identifying what the best possible customer experience looks and feels like, then working backwards to create the processes to deliver it.

But there’s a word of warning to be sounded for all operational companies on the topic of processes and procedures, and it’s something that was discussed at the Lending Strategy roundtable.

In modern business, much emphasis is placed upon streamlining, low-touch processes and automation. All of these, in their place, are very effective. But these are not necessarily the key to operational design not everything works in the same way. It’s important to identify which processes need more of a human touch and to ensure you design your operation to give them the attention they demand in order to work successfully.

The Future
There is undoubtedly opportunity in legacy books and brands, for lenders and servicers alike. Capitalising on this opportunity requires much more than a clever cross-selling strategy, it needs a highly efficient operational platform that is designed with the customer experience at the heart of it.

When you consider the gulf between the new lending figures for this year and the volume of existing loans, it’s clear that those organisations who get their legacy brand strategy right can expect to enjoy a competitive advantage over those who don’t.

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