RFi Group Insight - Australia: Pain-points in the digital application process for Personal Loans

Over the last couple of years, we have seen the rapid digitisation of the personal loan application process. According to RFi Group data, 47% of personal loan holders who applied for their loan in the last 12 months applied online, compared to 26% who applied in a branch. Furthermore, for borrowers who applied for their loan in the last 12 months, online applications were higher than branch applications across every age group. And while there is a slight skew towards older borrowers applying in a branch, the age group most likely to have utilised the branch for their application is actually 18-24-year-olds.

Despite being touted as a digitally savvy generation, glued to their smartphones, 38% of borrowers aged 18-24 who applied for their loan in the last 12 months applied for their loan via a branch, compared to 26% of borrowers overall. We know that borrowers in this age group are significantly less likely than their older counterparts to have held a personal loan before, so this result suggests that younger borrowers taking out a loan for the first time are turning to the branch over digital channels because they have questions about the product that they feel they need to ask of a ‘real person’.

Overall, the primary barrier to applying for a personal loan online is preferring to speak to someone during the application process in case any questions arise. Younger borrowers are also more likely to indicate that they were worried they would make a mistake if they applied online and that an online application would be too complicated. In order to shift more product applications online, as well as to ensure that borrowers do not fall out of the application process if they are struggling with an online application, lenders need to educate potential borrowers about the personal loan application process within digital channels with a particular focus on younger customer who are less likely to have experience with debt products.

An important aspect to this is providing borrowers with the ability to start stop and save their application at any time. RFi Group research has consistently found that this is one of most common features that would encourage online applications across different products. Allowing borrowers to stop and save their application and come back to it later would give borrowers confidence that if they have a problem with the application or have a question they need to ask of
their lender they could come back to the application without having to start again. For younger borrowers, the provision of a dedicated telephone application support hotline is also considered appealing and is more likely than average to
encourage younger borrowers to apply online.

Currently, borrowers who applied for their loan online are less likely to be satisfied than those who went to a branch. Providing customers with the ability to easily ask questions about their application when applying online is likely key to fixing this. Providing support for customers over the phone or in-person where possible will help to allay fears about an online application. Live chat services would also enable customers to ask their questions without leaving the online
channel. Lenders could also look at providing would-be customers with information about the loan they are applying for and the loan application process in simple language via their website or in the branch. For those that are new to digital or to the loan application process, education is key.

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