“The future is already here. It’s just not evenly distributed yet”.
That quote, often attributed to William Gibson, provides a very helpful framework for thinking about the future of consumer lending.
For the last couple of decades, it’s been abundantly clear that the internet will fundamentally reshape consumer lending. And yet, despite the progress that lenders have made in digitizing the distribution of their products, the actual design and manufacturing of consumer loan products remains stubbornly stuck in the past.
Loan payment insurance provides a good example.
The idea of insuring a borrower against the risk of events that can temporarily disrupt their ability to pay is not new. Loan payment insurance has been sold to borrowers as an add-on product for decades.
However, such insurance has never before been embedded at a portfolio level into the design of a consumer lending product.
Watch our latest conversation on Improving Online Profitability with Embedded Payment Protection.
And if you think about it, that’s kinda strange.
The internet has eroded a lot of the advantages that lenders used to have in distributing their products. We no longer operate in a branch-centric market. Having a deposit relationship with a consumer no longer guarantees a bank the right to cross-sell them loan products.
Today, every lender is fighting with every other lender to acquire and retain customer relationships. In this environment, it is essential to manufacture differentiated loan products that can build trust and brand affinity with customers.
We need to build digitally-native consumer loan products.
One way to do this is to provide all customers with embedded payment insurance that they can rely upon to protect their ability to pay in the event of unforeseen disruptions, such as involuntary job loss or disability.
A new research report from my friend Ron Shevlin at Cornerstone Advisors dives deep into the emergence of embedded loan payment insurance. The report explains how such insurance works and outlines its impact on borrowers and lenders.
The report is free to download, and (as usual with Ron) expertly researched and written, so grab your copy today!
