In the digitised age of credit price comparison sites, brand loyalty equals bought loyalty. In 2018, lenders must earn their custom by delivering market-beating products.

As interest rates continue to rise, the lenders that can drive down the cost of credit stand to prosper the most. Simply reducing margins, however, makes little sense. Next year, automated and agile credit technologies will help lenders to drive down costs and enable savings to be passed on to the customer in the form of more competitive rates.

Lenders will adjust to curbing enthusiasm

It remains to be seen whether rising interest rates will have an impact on what borrowers use credit for. Will credit still be used to fund aspirational items at the same rate as in recent years?

It’s likely that lenders will extend their repayment terms to allow monthly repayments to remain the same, despite an increase in cost overall.

Application declines will no longer mean ‘no’

Regardless, rate rises will have an impact on lenders’ affordability assessments. Borderline candidates will inevitably be excluded from products they once qualified for, which will trigger an increase in declined credit applications.

In 2018, lenders will start to turn this to their advantage. Instead of abandoning the customer at the point of decline, they will use intelligent systems to automatically identify suitable alternatives, ideally from their own portfolio, or from other lenders.

Doing so will enable them to protect their customer relationship and also ensures that customer doesn’t tarnish their credit score from repeatedly declined applications.

Contact centres will need to be rethought

Equiniti’s 2014 research report revealed that 61% of consumers preferred a telephone call or face to face meeting to explore a loan application. In 2017, that figure dropped to just 48%.

We can expect this trend to continue next year, reflecting a growing desire for self-service applications. In response, lenders will rethink their use of contact centre resources.

As most queries get resolved online, the role of contact centre staff will shift to the handling of more complex queries, and lenders will begin to outsource this function to a dedicated, specialist partner that can ensure all calls are handled by skilled, FCA-accredited individuals.

PSD2 will change everything

Driven by the advent of the Second Payment Services Directive (PSD2) in January, APIs are being opened up across the banking industry, enabling customer-permitted apps and services to access never-before-seen levels of transaction data.

Here, data is the new currency and the combination of customer-centricity and low cost is the key to attracting – and keeping – new customers.

The regulation amounts to EU-sponsored digital transformation in financial services, and outsourcers will play a crucial role in helping lenders keep up, stay relevant and harness their use of new data.

Richard Carter is Managing Director, Equiniti Credit Services

Richard Carter, Equiniti