Alternative Lenders Satisfying Customers with Digital Platforms and Quick Approvals, But Still Not Viewed As Customer Driven, J.D. Power Finds
Marcus by Goldman Sachs Ranks Highest in Personal Loan Customer Satisfaction
COSTA MESA, Calif.: 25 March 2019 — Record levels of credit card debt, rising interest rates and a proliferation of alternative lenders are making personal loans the fastest-growing category of consumer debt products. According to the J.D. Power 2019 Personal Loan Satisfaction Study,SM released today, many of these alternative lenders are upping the ante on customer satisfaction by outperforming lenders that provide more traditional loan types, such as home equity lines of credit (HELOC), through superior digital experiences and lightning-fast approval times.
"Given that half of all personal loans are used for debt consolidation or to pay off a credit card, it’s crucial that lenders get the customer interaction formula right with easy-to-navigate digital applications and rapid approval processes," said John Cabell, Wealth & Lending Intelligence Practice Lead at J.D. Power. "From a digital perspective, traditional banks need to work hard to meet evolving customer expectations. Non-traditional alternative lenders have their own communications gaps to overcome when it comes to customer perception of pricing and being profit driven. As this business matures and new players continue to enter the market, understanding competitor tactics and clear articulation of the value proposition to customers will become increasingly critical areas of focus."
This inaugural study evaluates customer satisfaction with personal loan providers and explores the key variables that influence customer choice, satisfaction and loyalty based on four factors (in order of importance): interaction; billing and payment; loan offerings and terms; and application and approval process.
Following are key findings of the 2019 study:
- Alternative lenders pose threat to HELOC market: Overall customer satisfaction with personal loan providers is 853 (on a 1,000-point scale). By contrast, the average customer satisfaction score among HELOC customers in the recent J.D. Power 2019 Home Equity Line of Credit Satisfaction StudySM is 834, with lower satisfaction correlating to fewer customer referrals.
- Customers perceive lenders as profit driven: When rating brand image, customers have clear perceptions that all lenders are relatively profit driven, with significantly deeper concern among customers of alternative lenders. Similarly lacking across the board are positive customer perceptions of reasonableness of fees and competitiveness of rates. Alternative lenders also rate significantly below their bank competitors in these two areas.
- Digital applications lead to better understanding and higher satisfaction: Digital is the most common channel used for a personal loan application, with 40% of personal loan customers applying entirely online. Overall satisfaction is highest among personal loan customers in the digital-only segment (886), which also has the highest percentage of applicants who indicate that they completely understood the application (91%). A complete understanding of the application is associated with a 137-point increase in customer satisfaction.
- Fast and efficient funding is critical: Receiving loan approval within two days is associated with a 55-point jump in customer satisfaction, and receiving funds within two days of approval is associated with a 50-point jump in customer satisfaction. By contrast, customers report the total average time for HELOC funding to be approximately 26 days from the time of application.
- Customers will consider alternate products: Despite the reported benefits, customers choosing personal loans are still not locked in to the product when shopping for their loan. Nearly half (47%) of such customers also considered competing products; 28% considered credit cards; 17% considered personal lines of credit; and 13% considered HELOCs.
The J.D. Power Personal Loan Satisfaction Study is based on responses from 3,413 personal loan customers and was fielded in December 2018-January 2019.
Marcus by Goldman Sachs ranks highest in overall customer satisfaction with a score of 899, followed by Lightstream (SunTrust) (887) and Upstart (873).
For more information about the J.D. Power Personal Loan Satisfaction Study, visit https://www.jdpower.com/business/resource/2019-us-personal-loan-satisfaction-study.
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable J.D. Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, J.D. Power has offices serving North America, South America, Asia Pacific and Europe.
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