40% of declined credit card customers find approval elsewhere, says research from RFi and GBG

Research by GBG and RFi highlights financial institutions could be making better informed decisions with more accurate customer data, and are losing customers in the process

The global technology specialist in fraud and compliance management, identity verification and location data intelligence, and RFi Group have published research that details how banks are digitising in Australia.

The report, titled, “Identity Verification: A Digital Utopia”, highlights the opportunities for financial institutions to capitalise on the shift to digital and mobile ways of banking.

It also highlights the risks and losses already being experienced by financial institutions that are not sufficiently investing in customer data and insights.

The report particularly highlights the missed opportunities many financial institutions are overlooking in their approach to credit applications.

The analysis emphasizes the importance of making informed, accurate, and timely decisions to avoid incorrectly declining a customer that may have otherwise been able to be approved if the right data was at hand.

According to the report, the ramifications for financial institutions that decline customers are dire and long-term.

Key stats from the report include:

Close to 40% of customers who report being declined for a credit card say they went on to apply and be approved by another provider.

Of customers who report being declined for a personal loan:

  • 29% say they will never consider that lender for a personal loan in the future.
  • 27% say they will now not consider the lender for any products.
  • 16% say they closed other products they had with the lender following the decline of their application.

Financial institutions are simultaneously challenged with capturing and understanding vast volumes of customer data to ensure they are not missing chances to sell and deliver products, and providing a frictionless customer experience with rapid or instant onboarding.

The latter challenge is heightened by the evolution and growth of the fintech sector, as 30% of consumers have reportedly used a Buy Now Pay Later (BNPL) service, 6% have used a neo-bank and 43% have used a fintech, according to RFi Group.

Carol Chris, Regional General Manager Australia at GBG, said, “In a mobile-first and digital-first environment today, the digital identity verification touchpoint is usually the very first interaction between a new customer and the organisation.”

“eKYC no longer satisfies just regulatory requirements but plays a key role in building customer lifetime value.”

“This is why financial institutions need to continuously look for ways to most accurately verify consumers with updated official data sources, while leveraging innovative onboarding processes and technology that deliver natural and frictionless customer experiences.”

Mortgage applications, which spiked by 19.3% last quarter, are another service being driven to change due to consumer behavioural shifts.

19% of mortgage borrowers say that some part of their loan application occurred online, increasing to 32% among those who took out their loan in the last two years.

39% say they would now be comfortable completing and submitting a mortgage application entirely via a digital channel. Close to half of mortgage borrowers aged under 35 now say they are comfortable completing an application via a digital channel.

1 in 5 mortgage holders now say they would rather apply for a mortgage via a digital channel.

Chris continued, “Three-quarters of Australians are already conducting the majority of their banking on a smartphone or computer. One in four banking customers have already switched or are considering to switch to a neobank.”

“It’s clear that digitisation is already in full swing across the financial services industry and our everyday lives. The high receptivity to fintech and neobank services is a clear indication of the preference for a different standard of hassle-free and seamless customer experiences.”

Alex Boorman, Managing Director, Consulting at RFi said, “Our research shows that consumers have not only shifted to more digital ways of banking and managing their money, but they’re also unlikely to return to pre-pandemic behaviours any time soon.”

“There is a growing level of comfort in remote and digital interaction with a financial institution that is presenting both opportunities and challenges for financial services providers.”

“While digital-first approaches allow financial institutions to more deeply engage with customers and streamline their product delivery, a digital-first consumer is exposed to more identity fraud and financial crime threats than ever before.”

“Financial institutions will continue to be challenged this year by the need to simultaneously keep customers protected, sustain digital trust, and deliver frictionless customer experiences.”