October 2020

Lending CX

How Banks Create Sustainable Differentiation With Milestone-Based Lending

Table of contents logo - Forrester Consulting

A Forrester Consulting Thought Leadership Paper Commisioned by Blend

Table Of Contents

  1. Executive Summary
  2. Financial Sales Are About Customer Needs, Not Rates And Features
  3. Banks Say They Understand The Importance Of Milestone-Based Strategies
  4. Banks' Milestone-Based Lending And Marketing Efforts Fall Short
  5. Milestone-Based Investments Must Reflect Strategic Choices
  6. Banks Must Put Customer Relevance And Value At The Core Of Their Strategies
  7. Key Recommendations
  8. Appendix

Financial institutions (FIs) have long enjoyed being the essential engines of our economy — reaping rewards as they help customers navigate life’s achievements, aspirations, and adversities. However, this traditional role has started to come under pressure from the impact of customers’ increasing range of options and a growing base of digital disruptors in the financial services industry.1

In this new competitive landscape, the success of FIs will hinge on their ability to remain relevant to customers. At the heart of this effort is a drive for financial services institutions to provide real customer value through personalized experiences and product alignment that address customers’ needs when, where, and in the context they need.2

Blend commissioned Forrester Consulting to evaluate the current state of milestone-based lending demand and strategies. Forrester conducted an online survey with 2,026 banking consumers and 168 lending strategy leaders at FIs to explore this topic. We found that successful milestone-based lending programs were determined by how well an FI was able to identify, understand, and respond to customers' life events or milestones. However, most FIs struggle to deploy milestone-based strategies today.

Milestone-based lending is defined as an approach whereby lenders combine the context of customers' financial milestones with their financial profiles to deliver specific offers or calls-to-action in near real time.
Project Director:
  • Nicholas Phelps, Senior Market Impact Consultant

Contributing Research:
  • Forrester’s eBusiness and Channel Strategy research group

COOKIE ACCEPTANCE IS REQUIRED TO REGISTER FOR ACCESS TO DIGITAL ASSET

Key Findings

  • Customers and banks recognize the importance of milestone-based lending.

    This study demonstrates that customers are primarily driven by their own financial context and needs when choosing a financial product, rather than by rates or feature sets. Three-quarters of FIs say they recognize that meeting important customer needs with relevant, milestone-based strategies will be an important determiner as to whether their companies succeed or not.

  • Despite how important milestone-based strategies are, many banks are struggling to deliver robust programs.

    Milestone-based lending strategies are rooted in three foundational capabilities: personalization, or the ability to tailor product offers and experiences to the customer at a 1:1 level; cross-product decisioning, or the ability to instantly deliver a qualified lending decision across product lines for qualified customers, and product configuration/customer experience (CX), or the ability to promote self-service and reduce friction in customers’ purchase journeys. However, the majority of banks struggle to deliver consistent, high-maturity experiences across these pillars, and so they leave themselves open to differentiated experiences that are offered by agile upstarts and digitally savvy fintech disruptors.

  • Building successful milestone-based lending strategies must be taken step-by-step.

    It’s important that banks evaluate themselves on the key capabilities that will power milestone-based lending strategies. Specifically, they must follow an intentional, sequential change management approach that will build the essential foundation first, before bringing capabilities to market and setting the stage for continual testing and improvement. This report outlines a three-step roadmap for FIs to follow in this pursuit.

NEXT SECTION: Financial Sales Are About Customer Needs, Not Rates And Features

Customers are driven to open new financial services accounts when relevant product offers align to their context and life stage needs.

If you’re listening, your customers are telling you what they need. They just had a child, and they’re going to need an extra bedroom, and they’re going to need to start planning for education costs. This of course means they need banking products and guidance to help them navigate these changes. Luckily, your organization has competitive rates and a new service app that provides all of the helpfulness and functionality a modern banking customer could need.

But here’s the catch: They don’t see themselves as your customer at all. Two-thirds of consumers hold financial products with several different banks today, and nearly half of customers believe that all banks are basically the same.3 So, if your relationship with customers is so mutable, how do you position yourself as advantageously as possible? The answer: Become obsessed with understanding what your customers need, and then respond to those needs as effectively as possible.

CUSTOMERS RESPOND WHEN BANKS DELIVER HIGHLY RELEVANT VALUE

Customers are sending a clear message — they respond to relevancy, and they lean into relationships with FIs that provide value to them as they experience key moments in their lives. For example, 74% of respondents told us they believe it’s helpful to know how financial products can help them adjust to their life’s milestones, and 72% said they would prefer to work with an FI that understands and speaks to what’s currently happening in their lives. What’s more is that the desire for fit and relevance is stronger than that of brand loyalty; 71% of respondents indicated they would be open to starting a relationship with a new bank if they were presented with a particularly relevant product offer.

Relevancy, of course, is rooted in context. And the context customers bring to financial product decisions reflects the significant events that are happening in their lives. Customers turn to financial products to help them with their life’s main milestones, e.g., a promotion at work takes them to a new city requiring a mortgage; the kids have left the house so it’s time to finally create that dream kitchen; and so on. These life events create opportunities for FIs to be seen as not only relevant, but essential to navigating life’s milestones. This is what we mean by milestone-based lending — a term referring to strategies that demonstrate listening, understanding, and ability to meet customers' various life contexts.4

Across financial products, customers are saying that the ways in which an FI understands and responds to their milestones are the number one or number two driver of product choice. This study asked banking customers who had opened a new account within the past 12 months what reasons they had for doing so, and we found that significant life events were consistently the top reason for opening a new account (see Figure 1).5

Banks must hear, understand, and act upon significant customer life events or milestones to drive relevance and fit in their product offers.

Of all the reasons why you opened a new account, which one was the primary reason?

NEXT SECTION: Banks Say They Understand The Importance Of Milestone-Based Strategies

To their credit, the FIs in our study demonstrated that they are listening, by recognizing the importance behind meeting the customer on their terms with relevant experiences in hand. They have backed this up by investing in a foundation of capabilities to help them achieve milestone-based lending approaches.

BANKS EMBRACE CUSTOMER-CENTRICITY AND MILESTONE-BASED STRATEGIES

FIs demonstrate they are embracing customer-centricity, and they believe that milestone-based strategies sit at the heart of their success. Forty-four percent identified improving CX as one of their three most important goals for the year, while 35% listed better understanding and responding to customer needs as a top-3 objective. At the same time, 77% say that milestone-based lending will be important or very important to their companies’ success (see Figure 2).

Additionally, these FIs are setting themselves up to properly build out their milestone-based capabilities. Sixty percent of surveyed FIs have already adopted milestone-based strategies, and 26% are saying they intend to do so by the end of 2021. Within these strategies, a majority of surveyed decision-makers include customer milestones like relationship status changes (69%); events involving family or children (65%); changes to living location (64%); shifts in employment status (61%); and school-related life events (51%).

A majority of respondents (69%) say they increased their investment in milestone-based capabilities in the past year, including 36% who say their investment has increased by 10% or more. What’s interesting is that 62% plan to continue raising their investments through 2022, but the proportion of FIs that say they plan for increases of 10% or more drops over that time to just 11%. This indicates that FIs expect to be maintaining and optimizing their programs within two years, rather than building them for the first time (see Figure 3).

Larger banks (those with $250 billion in assets or more) and smaller banks (up to $250 billion) are equally focused on improving CX, but smaller FIs are more than four times as likely to see milestone-based banking as very important to their success.
Figure 2A

"Which of the following are your primary business goals for this year?"

Click to see data


Percentage of answers from that said:

Base: 168 North American decision-makers with oversight into lending practices specific to loan products/strategy
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020Base: 21 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020 Base: 29 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020Base: 23 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020

POLL - FIGURE 2B

See How Your Company Compares By Taking Our Poll

"How important do you believe milestone-based lending is to your organization's success?"

POLL

See How Your Company Compares By Taking Our Poll

How other companies answered:

DID YOU KNOW?

Smaller Fls are more than four times as likely to see milestone-based banking as very important to their success.

Base: 168 North American decision-makers with oversight into lending practices specific to loan products / strategy​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​


POLL - FIGURE 3A

See How Your Company Compares By Taking Our Poll

"Which of the following best describes your organization's plans to invest in milestone-based lending in 2 years from now?"

POLL

See How Your Company Compares By Taking Our Poll

How other companies answered:

Base: 168 North American decision-makers with oversight into lending practices specific to loan products / strategy​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​


Figure 3B

"Which of the following best describes your organizations’ plans to invest in milestone strategies two years from now?"

Click to see data


Percentage of answers from that said:

Base: 168 North American decision-makers with oversight into lending practices specific to loan products / strategy​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​Base: 21 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​​ Base: 29 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​Base: 23 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, July 2020​

Larger FIs have led the surge in the past year, with 57% substantially increasing their investment in milestone-based strategies from last year, as compared to just 21% for smaller FIs over the same period.
NEXT SECTION: Banks' Milestone-Based Lending And Marketing Efforts Fall Short

It’s encouraging to see that banks are taking customer-centricity seriously and are leaning into milestone-based strategies which are intended to drive relevance and value to customers. The issue is that at present most strategies are falling short of expectations. To better understand these capability gaps, this study identified three pillars of milestone-based excellence: personalization, cross-product decisioning, and product configuration/CX (see Figure 4).

Banks assessed themselves on critical dimensions under these categories, and their capabilities were compared to how important they thought these dimensions were to their companies’ success. These two sets of results were then compared in order to derive a gap delta between performance and importance. What follows is a review of each pillar and how FIs rated them in terms of importance (how significant the capability is to a company’s success) and performance (how optimized a program is today).

Three Pillars Of Milestone-Based
PERSONALIZATION DRIVES RELEVANCE

Personalization refers to whether or not an FI can tailor product offers and experiences to customers at a 1:1 level, an essential ability when more than seven in 10 customers say they prefer banks that speak to their life events and milestones. Within the personalization category, we tested FIs’ current abilities across four key dimensions:

  • Personalized product recommendations.

    This is the ability to make prequalified loan recommendations in near real time, based on individual financial profiles. Personalized recommendations serve to increase the relevancy of product offers while reducing the steps, data input, and general friction customers need to navigate in order to take action.

  • Dynamic segmentation.

    Dynamic segmentation requires bringing together first-, second-, and third-party data to create multiple dynamic profiles for personalized marketing experiences. It helps ensure that banks’ marketing efforts reflect customers’ relationships and interests and that media efforts are appropriately targeted where they are most likely to gain customer attention.

  • Personalized omnichannel experiences.

    This capability is about ensuring that personalized marketing and product offers are part of a consistent and seamless customer experience across every touchpoint. Avoiding confusion and reducing dissonance across touchpoints is essential to easing customers’ paths to purchase.

  • Marketing technology (Martech) ecosystem integration.

    Every personalization dimension requires coordination across systems and sources of insight and execution tools. Martech ecosystem integration is about aligning an FI’s martech stack to enable delivery of personalized customer experiences and offers throughout customers’ journeys (see Figure 5).

PERSONALIZATION DRIVES RELEVANCE
CROSS-PRODUCT DECISIONING REMOVES BARRIERS TO EFFECTIVE, EFFICIENT PURCHASE

FIs with cross-product decisioning capabilities are able to avoid slowdowns in the customer journey by reducing laborious and manual data entry requirements for both customers and the bank themselves. As a result, credit decisions are delivered more accurately and in near real time, delivering a better customer experience. Cross-product decisioning involves mastery across the following four dimensions:

  • Data integration.

    FIs with mature data integration practices reduce friction in the buyer journey by ingesting and managing relevant information to limit the amount of data required from consumers to deliver a decision. Data integration serves as the foundation that personalization and consistent omnichannel experiences rest upon.

  • Instant decision.

    Instant decisioning lets an FI provide a decision in real time without requiring additional documents, follow-up, or preapproval from a customer. This capability is about reducing customer effort to get to the point of purchase and creating an immediate connection between an offer and its origination.

  • Integration management.

    Integration management delivers the ability to integrate product decisioning tools with back-end systems at the platform level, allowing banks to scale use of common data services and avoid repeating complex integration efforts for each new product that comes online. It allows FIs to grow their programs organically and easily.

  • Credit and risk policy management.

    Credit and risk policies are essential tools for avoiding disastrous lending mistakes, and this capability ensures that a bank’s policies are incorporated into product decisioning in real time (see Figure 6).

Blend-Digital TLP_Callout Icon
Data integration is a foundational capability, which provides the source of insights that real-time decisioning, personalization, and consistent customer experiences depend on.

Cross-Product decisioning
PRODUCT CONFIGURATION AND CX POWERS SELF-SERVICE AND REDUCES FRICTION IN THE BUYER JOURNEY

Banks that have optimized their product configuration and CX practices empower customers with self-service support, thereby avoiding overreliance on the human touchpoints that can often lead to dissonant experiences. FIs with mature practices give their front-end employees the perspectives and tools that are required to seamlessly move the customer along their buyer journey. Product configuration and CX is powered by the following four dimensions:

  • Self-service conversion innovation.

    This capability allows a bank to automatically pre-fill all known customer information into its systems and enable digital self-service best practices for customers in order to make the purchase journey more seamless. Creating straightforward self-service tasks helps both customers and banks: Customers get what they need faster and easier; banks save money when customers use lower cost self-service.6

  • Omnichannel CX.

    Customers expect banks to deliver a consistent experience across any and all touchpoints. By adopting omnichannel CX practices, banks can configure their customer experiences for any channel, allowing customers to move from one channel to the other without losing context or having to start over.

  • Speed-to-market.

    As new products come online, they must be quickly onboarded into decisioning and application processes. Speed-to-market programs let FIs quickly assemble new loan product and application experiences via no-code configurators and/or simple plug-and-play templates.

  • Conversion optimization.

    Conversion optimization empowers customers with digital onboarding services that let them understand, activate, and access digital services and loan applications, which leads to better financial outcomes for customers and business results for banks (see Figure 7).

Product configuration CX
IT’S TIME FOR BANKS TO FINISH THE FOUNDATION AND START BUILDING THEIR MILESTONE STRATGEGIES IN EARNEST

Banks have made genuine progress on their path to milestone-based lending strategies, but the maturity results indicate that much more needs to be done. It’s time for banks to move on from building the foundation for these capabilities and take the next step in delivering milestone-based lending strategies. In order to do so, FIs need to take a measured, step-by-step approach to rounding out their abilities and start driving differentiated customer value. The next section will lay out recommendations for the sequence of steps banks should consider.

NEXT SECTION: Milestone-Based Investments Must Reflect Strategic Choices

As they look to shore up and build upon the foundation of their milestone-based strategies, FIs need to align focus and investment in the right order and cadence to maximize returns. Many FIs appear to have fallen into operating with a strategy-by-accident approach to building key capabilities, and this results in FIs being hindered by key performance gaps. This study recommends that banks evaluate and plot their course using the following sequence of three steps (see Figure 8):


STEP 1:FOCUS ON SYSTEMS INTEGRATIONS
Milestone-based strategies require seamlessly integrated data and technology capabilities to succeed.

Effective milestone-based lending doesn’t just involve pushing out campaign content that includes messages about moving towns or the joy and responsibilities of a new child. They are carefully executed strategies that tie together data and systems to bring insight and execution together seamlessly. Focusing on this connective tissue across data and systems can set the groundwork for better front-end execution and optimization. The first integration step involves evaluating four capabilities from the milestone-based capabilities list:

  • Data integration (59% importance/performance gap).

    A mature data integration practice means an FI can ingest relevant data sources to deliver a credit decision, thereby minimizing the amount of data a consumer must provide during an application, approval or preapproval. This foundational capability that helps drive accuracy and scale, reduces friction within the customer journey, and stitches together the fabric of data and inputs into a cohesive, automated decisioning engine.

  • Integration management (50% importance/performance gap).

    Often referred to as a services-based architecture, banks with optimized integration management programs can integrate with relevant back-end systems at the platform level (e.g., core system, LOS, digital banking system, IDV/KYC system, etc.), mitigating the need for complex integrations for each new product that comes into the program.

  • Credit and risk policy management (48% importance/performance gap).

    With this capability, an FI ensures that credit policies and risk management systems are incorporated into the stack on day one. Doing so helps ensure that automated workflows and tools deliver reliable outcomes for customers and banks alike.

  • Martech ecosystem integration (44% importance/performance gap).

    Pursuing this step means an organization learns to integrate each aspect of its martech ecosystem, from data ingestion, to insights generation, to campaign execution, in a way that embeds personalized customer experiences and offers throughout the customer journey.

STEP 2: BUILD YOUR FRONT-END CAPBILITIES

With the foundation set and key systems integrations in place, FIs can turn their focus toward optimizing front-end capabilities that speed decisioning, enable self-service (for customers and front-end employees), and reduce friction in the customer journey. The front-end capabilities step requires focus on the following five dimensions:

  • Conversion optimization (57% importance/performance gap).

    Conversion optimization capabilities will ensure that customer self-service is supported during the application process — as banks provide access to digital onboarding services, which help drive more efficient sales processes and set up customers for better financial decisions.

  • Omnichannel CX (54% importance/performance gap).

    FIs that focus on omnichannel CX are driving toward the ability to configure experiences for any channel, including desktop/mobile self-service and in-branch/call center employees. At any touchpoint, the customer receives consistent guidance for the next best step toward purchase, avoiding dissonance that undermines customers’ confidence in their product choices and the FI that confuses them.

  • Personalized product recommendations (47% importance/performance gap).

    An FI that has optimized its personalized product recommendations has aligned its data and systems to enable product recommendations for prequalified loans, which are based on individual customer financial profiles in near real time and at any point-of-sale or application (e.g., web, ATM, call center, brick-and-mortar location, etc.). This data is provided automatically, without the need for additional questions or data requests from the customer. As a result, the customer receives an easy-to-navigate, instant, and consistent experience across its journey.

  • Self-service conversion innovation (42% importance/performance gap).

    FIs with optimized self-service conversion innovation programs are able to pre-fill all known customer information to eliminate manual data entry while adopting other digital self-service best practices that deliver high-conversion experiences. Customers receive support that removes the rote (and error-prone) tasks of manual data entry, allowing for more time and focus on how they can best use financial products to support their life changes.

  • Instant decision (41% importance/performance gap).

    A mature practice indicates the ability to deliver a preapproval decision in real time without the need for additional documentation or a follow-up with a customer on the phone. It builds on the integration of systems covering data ingestion, insights, product decisioning, and credit and risk policy management to deliver a more frictionless experience for customers.

Once data and systems are integrated, it’s time to extend these capabilities to improve customer experience and reduce friction for customers looking to manage their milestones with new financial products.
STEP 3:EMBRACE AN INSIGHTS-DRIVEN APPROACH

By this stage, FIs have created the connections between systems and data that are required to plan and execute consistent, personalized milestone-based lending programs at scale. They have also established the processes and tools which are required for delivering improved customer experiences. It’s time to supercharge these capabilities by transforming business decisioning and execution to be driven by customer insights and to fuel milestone-based strategies over the long term. The insights-driven transformation step requires focus on the three remaining maturity capabilities:

  • Dynamic segmentation (56% importance/performance gap).

    Maturity in dynamic segmentation means FIs can ingest and leverage all available customer data to generate multiple, dynamic customer profiles and serve personalized marketing messages across touchpoints in near real time. As a result, an FI’s customer and prospect audience is greeted with highly relevant, targeted, and actionable messages that help optimize conversion and consideration.

  • Personalized omnichannel experiences (54% importance/performance gap).

    When an FI brings together the disciplines of data and technology integration with front-end capabilities intended to reduce friction in the customer’s journey, they can make prequalified loan product recommendations based on individual customer financial profiles in near real time and at any point of sale or application (e.g., web, ATM, call center, brick-and-mortar location, etc.). This data is provided automatically, without the need for additional questions or data requests of the customer. As a result, an FI’s customer and prospect audience is exposed to a logical path from awareness to purchase that reduces barriers to interaction, value exchange, and purchase.

  • Speed-to-market (46% importance/performance gap).

    This dimension focuses on the ability to quickly assemble new loan products and application experiences, getting them into market using a no-code configurator and/or simple plug-and-play templates. These new offerings fit into preestablished lanes for the back-end requirements driving milestone-based customer experiences and allow FIs to grow their portfolio organically within established frameworks. This ends up leading to faster incorporation and rollouts of new product lines.

Long-term, sustainable success comes from aligning technology, data, and long-term strategies and business objectives.

POLL

See How Your Company Compares By Taking Our Poll

Which of the milestone-based lending maturity steps represents where your organization is today?

BANKS PRIORITIZE AGILITY, POWER, AND SUPPORT FROM TECH PARTNERS

As they look to acquire technology to assist with milestone-based strategies, banks are focused on finding solutions that enable both agile decisioning (by delivering easy integrations with existing technology) and quick and easy testing and optimization of new products into the system. They also reported a desire for onboarding support and AI/deep learning and natural language processing to better understand insights from customer interactions (see Figure 9).

In the fast-paced and competitive environment, which has been created by challenger banks and fintech start-ups, it’s important for banks to quickly act on changing customer expectations in order to capture sustainable differentiation. Digital agility and time-to-market are critical success factors in these efforts, and they require the ability to quickly and easily onboard new product experiences, as well as optimizing for conversion outcomes. FIs therefore must embrace ongoing innovation, iteration, and experimentation to stay relevant and competitive over the long term.

Smaller, more agile, and digitally native competitors are disrupting expectations for how banks serve their customers.
Figure 9

"When selecting a digital lending platform or technology partner, how important is it that the partner have the following capabilities?"

Click to see data


Percentage of answers from that said:

Base: 168 North American decision-makers with oversight into lending practices specific to loan products/strategy​
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020​Base: 21 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020​ Base: 29 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020​Base: 23 North American decision-makers with oversight into lending practices specific to loan products / strategy​
*Sample sizes are low, so the findings should be taken directionally only.
Source: A commissioned study conducted by Forrester Consulting on behalf of Blend, October 2020​

NEXT SECTION: Banks Must Put Customer Relevance And Value At The Core Of Their Strategies

Banking customers signal they will choose relevance and fit over loyalty when making financial product choices. They are far more interested in getting the best products that meet their needs, than by interest in the features other FIs can provide. In other words, as with other industries, a banking customer’s choice is fundamentally about them, not you. When needs drive customer decisioning, the anticipation of those needs should become the focus for every FI’s marketing program.

RELEVANT FIT IS THE KEY DETERMINER OF FINANCIAL PRODUCT CHOICE

Customers have multiple options to choose from when deciding on a financial product, so it should be no surprise that customers will favor banks that can communicate how a financial product will help them navigate their life milestones. Consumers were asked why they chose to open a product with a specific bank over the other options available to them, and as their primary response they chose an option that reflects their interest in getting the best rate. This is familiar competitive territory for most FIs, but it also represents an undifferentiated, commodified race to the bottom.

Beyond the rate, customers favored banks that clearly communicate the product’s fit while removing barriers to purchase. The answer choice for best fit, was “This bank’s product matched my needs better than most banks,” while best support included “They made it very easy for me to choose the right option,” or “I felt I fully understood the product details needed to make an informed choice” (see Figure 10).

Banks that leverage their understanding of the customers’ context and needs, deliver relevant messaging that speaks to those needs, and provide support/reduce friction in the customer journey enjoy a consistent competitive advantage and will be more likely to win business across financial product lines.

Banks must learn to compete on driving more relevant and valuable experiences, and not just on having the lowest rates.
Banks can win business and differentiate themselves beyond the bottom-line rate by focusing on fit and support.
BANKS MUST BALANCE THE POWER OF CUSTOMER DATA WITH CUSTOMER ADVOCACY

This is not a call for a customer insights gold rush. Banks are moving to unleash insights and relevance from customer data, but they also have an obligation to be excellent custodians of customer information. In other words, true customer-centricity also requires that FIs pursue these strategies with customer advocacy at their core — that means data ethics and a focus on driving better financial outcomes for customers must remain at the heart of milestone-based lending efforts.

The customers who were surveyed for this study back this up, as a significant majority reported they expect companies and FIs to respect their data and keep them informed with the critical information they need to make productive choices. Additionally, the expectation exists for banks to take an active role in helping customers understand how financial products can help them, and customers appreciate it when a bank reaches out to them with product or service recommendations that are more rooted in their needs, rather than in what the FI wants to sell (see Figure 11).

Customers expect that banks will work to safeguard their information and help drive better financial outcomes for them.
NEXT SECTION: Key Recommendations

Forrester’s in-depth survey of banks and banking customers about milestone-based lending strategies yielded several important recommendations:

NEXT SECTION: Appendix

Appendix A: Methodology

In this study, Forrester interviewed 2,026 North American consumers who have opened a loan in the past 12 months and 168 North American decision-makers with oversight into lending practices that are specific to loan products or strategies. Respondents were offered an incentive as a thank you for time spent on the survey. The study began and was completed in October 2020.

Appendix B: Demographics/Data


Demographics of the study Demographics of the study

Appendix C: Endnotes


1 Source: “Retention Is Not Enough: Banks Must Build Emotion-Rich Relationships To Grow,” Forrester Research, Inc., May 14, 2020.

2 Source: “Financial Firms Need To Rethink Personalization,” Forrester Research, Inc., September 26, 2019.

3 Source: “Retention Is Not Enough: Banks Must Build Emotion-Rich Relationships To Grow,” Forrester Research, Inc., May 14, 2020.

4 Milestone-based lending refers to strategies that demonstrate listening, understanding, and the ability to meet customers’ various life contexts.

5 The sole exception was found with credit cards, where “I received a compelling offer from the bank” was the top choice for in-market customers. It’s worth noting here that compelling offers themselves reflect a mastery of relevance in order to be effective.

6 Source: “Best Practices In Global Mobile Banking Functionality, 2019,” Forrester Research, Inc., December 23, 2019.


This study was conducted by Forrester’s Custom Content Consulting Practice. Get in touch to discuss your custom content needs and goals. Learn more about all of Forrester's consulting capabilities.

About Forrester Consulting

Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting.

© 2020, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to forrester.com.

Cookie Settings