Results of a new survey from PayNearMe show demand for digital payment types and general dissatisfaction with the loan-paying process. Both are omens for the industry.

When asked what would make it easier to pay on time, 40% said more payment options. A must-have payment option is mobile wallets, with 59% saying they are likely or very likely to use one. That is up from 37% three years ago. According to Forbes, 53% of consumers use digital wallets more than other methods. By 2026, Juniper estimates that 5.2 billion people will use digital wallets.

Wallet demand surging

Over the last three years, Venmo’s use has risen from 27% to 43%; 42% use Cash App. Close to 10% see PayPal as their preferred checking account. Folks between 45 and 60 see Venmo as a preferred payment option; the rise in popularity isn’t restricted to younger groups.

One cohort flocking to digital wallets is folks with low incomes. Almost half of those making under $25,000 annually, 47%, agreed that the ability to pay loans with a stored wallet balance is very important for them to pay a bill on time. Overall, 38% said the ability to use digital wallet-stored balances would make repayment easier.

A personalized and optimal mobile experience drives customer loyalty. More than 60% of respondents pay loans with their smartphone; that’s almost twice as high as those using a computer.

Loan process evaluation begins with understanding consumer emotions

Institutions must factor in the emotions customers experience when preparing to make payments. A surging percentage, 42% feel disorganized when repaying loans. More than half, 51%, report experiencing stress and anxiety when managing and making loan payments; that’s up from 29% three years ago. More than 60% wish managing and paying loans was easier.

Institutions should remember these emotions when designing the repayment experience, including on mobile, and do everything they can to simplify the process. Streamline it so login information and other key details are auto-populated. More than 30% said the ability to pay loans without having to remember that information would make the process easier, and 80% want their payment screen dynamically populated with their loan details.

Personalization is key

They are leveraging technologies like AI to personalize the experience. More than two-thirds of respondents, 69%, said having a tailored experience was very important. Two in five agreed it’s important to have an experience where the payment platform recognizes them and their preferences. The payoff is significant: 68% highly recommend a lender with a highly personalized experience, while 82% say a poor loan repayment experience would influence their decision to switch lenders in the future.

PayNearMe EVP and CMO Anne Hay said these tools can determine when and how people like to pay. Don’t inundate them with 20 payment options if they prefer one; it adds friction. Perhaps they like text or email payment reminders; 47% said such messages would make it easier to pay on time.

Compelling information, yet many lenders still need to learn these lessons. Hay said some don’t have the right technology. Others don’t employ data scientists; if they do, they are often busy in other areas.

“The gap between consumer payment preferences and the payment experience that lenders currently provide continues to widen,” said Hay. “It’s clear that the personalization of payment experiences could alleviate the current stress and dissatisfaction associated with traditional loan repayment processes, and choice of payment options is key to personalization.

“Expanding payment types and channels is no longer optional for lenders. The data underscores a clear trend toward the increasing importance of digital wallets for loan repayment. Payment choice and convenience are critical factors if lenders want to create the customer experience consumers desire.” 

Look beyond finance for the standard

Hay said the lender’s service target lies outside the industry. Their customers are used to Amazon’s simplicity and intuitiveness. Anything less increases attrition and raises costs. Almost 20% of survey respondents regularly call customer service to pay their loans, leading to rising operational costs.

“The industry has reached a tipping point, as evidenced by the overwhelming responses that indicate the critical importance of payment experiences in shaping customer satisfaction,” Hay added. “With nearly eight in 10 respondents (79%) expressing a likelihood to stick with the same lender in the future following an exceptional payment experience, it’s clear that a quality experience has become an important factor in consumer decision-making. For the borrower, the payment experience is the customer experience.”

Understanding the importance of loan payments in customer attraction and retention

Bill and loan payments are the most common consumer touchpoints with a financial institution. More and more equate that with the overall consumer experience. If it’s good, almost 80% stay, with many recommending the institution to others. That impacts downstream revenue from new and established customers.

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“When that happens, it’s how can lenders not pay attention to this very critical point,” Hay said.

Yet many are stuck in the Stone Age. They don’t measure customer satisfaction, possibly reasoning they either will pay eventually or don’t have other options. Some admit their evaluations are limited to reading online comments after the fox has entered the henhouse. For those who bother reading feedback, the payment experience is the top problem by far.

“If that loan experience is their first interaction with a bank or credit union, and it’s poor, what’s the likelihood they’ll sign up for a bank account?” Hay asked.

PayNearMe moves to increase fraud protection, introduce processing redundancy

PayNearMe recently inked a deal with Accertify to incorporate the latter’s fraud protection technology into PayNearMe’s MoneyLine Platform. While the impetus was to reduce gaming and sports betting fraud, Hay said the technology is generating interest from payment clients, too.

In March, PayNearMe introduced Smart Switch, a technology providing full card processing redundancy with a single integration and contract. Companies onboarding Smart Switch can reroute card transactions should they experience processor issues. It’s completed on the back end without any impact on the customer.

“That’s a first in the bill payment industry; no one else offers that today,” Hay said. “Now, we can ensure that if one processor goes down, we can still process transactions. It’s literally the flip of a switch for us.”