In Q4 2019 (pre-COVID), we surveyed 3,000+ UK businesses about their preferences for lending product application – through a personal medium or digital – and given the great change in the landscape since then, we were interested to see how much sentiment had changed in the subsequent years.
Do businesses still want a personal touch? Yes, for more complex lending.
When applying for a credit card, a relatively simple product, 7 in 10 would prefer to apply through a digital medium e.g., online via a PC, laptop, mobile phone or tablet.
However, whilst half would prefer to apply for a business overdraft or business loan digitally, a similar proportion would prefer a personal process, via face-to-face or telephone.
And when it comes to a more complex product, like a commercial mortgage, digital preference is in the minority with only 3 in 10 preferring this medium over application either face-to-face or over the phone.
The more complex a product, the greater the preference for a personal approach. Part of this is practicality – regulatory and legal compliance for such products may require more detailed explanations. But preference is also driven by a need to build trust and understanding between both the business and the provider.
Digital preference has increased post-pandemic, but less so for commercial mortgages.
In Q4 2019, most businesses preferred to apply for loan products face-to-face or over the phone. Application for credit cards was the exception even back then, with 65% preferring a digital approach.
But fast forward to Q4 2022, about half prefer to apply for overdrafts and business loans digitally. The preference change is most notable for business loans, where only a third preferred to apply digitally back in Q4 2019.
Notably, there was only a small change in preference for digital application for commercial mortgages with the majority still preferring to apply face-to-face or over the phone.
Future banking: digital versus personal approach
While we have seen a shift to digital preference, driven by mobile, it’s not a medium preferred for complex lending products. Here, a personal approach is preferred, maybe needed, especially when further explanation is required. It’s unlikely that businesses will return to personal application for simpler products, but will digital application extend out? And if so, how fast and how far will it go?
Looking even further, might we transition to a time where businesses use “virtual branches” through platforms such as the Metaverse, to interact with avatar bankers and make real-world applications? For simple products that would seem to be the next step, but for complex products are businesses always going to need the human touch?
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