By John Flynn, Open Lending President & CEO
As COVID-19 continues to spread, the government and general public are struggling to deal with the growing concerns. From an individual aspect, people fear for their personal health – both physical and financial. Businesses are concerned about both the short- and long-term effects. States have begun closing public facilities, limiting gatherings and encouraging social distancing.
The Fed has lowered interest rates and cut borrowing costs in an effort to slow the fall of financial markets as a result of the corona pandemic. What does that mean for the lending industry as employees experience reduced hours, job losses or responsibility to care for sick family and friends?
Overall, costs and margins may be affected, but this is an opportunity for local financial institutions to demonstrate how they serve their communities while helping consumers in their time of need. As interest rates fall, more cost-effective loans can be offered to all borrowers, including those with lower credit scores. Help borrowers with lower rates as you also help your credit union or bank. Build trust and, therefore, long-term relationships.
Traditional financial institutions have historically been the place for members to turn in a time of need, but you still have to be convenient by working with tech partners to provide more remote services and make more loans faster. Financial institutions would be wise to proactively create new programs to strengthen the financial situation of their current customers by creating refinancing programs. In a time when there’s uncertainty, you can create programs to help put your customers and members in a better position to recover from the growing pandemic. Workers in travel and service industries are getting hit hard with reduced hours, government-enforced shutdowns and worse; helping to raise up our communities right now will help raise all ships.
As nations work to solve the medical concerns and to protect their citizens, just as we have at Open Lending, financial institutions can follow suit. Continue to make helpful offers to them across your platforms, especially digital. Ensure consumers are aware of your special, pandemic-related relief products and their benefits to them.
Lower rates will make many refinancing offers more attractive. Take advantage of the new interest rates and pass those savings on to consumers. Couched in a message of help with truly helpful offers – perhaps even low- or no-cost – make sure consumers know what’s available to them. Carefully crafted messaging will be critical so as not to appear or be opportunistic.
As all of us carefully try to navigate the corona virus outbreak, we’ll continue to try to do what’s best for our society, both from a personal and financial safety perspective. Banks and credit unions can use this as an opportunity to re-invest in service and leverage technology and data to make these offers an easy process for scared consumers.
Stand by your community and help them get through these trying times to a position that’s better than when they entered. Such an approach may reduce your institution’s financial returns in the short term but will pay huge dividends in the long term.