With a flat and low yield curve, borrowers’ demand for long-term fixed-rate loans is high. Furthermore, based on the forward market and most analysts’ predictions, the yield curve is expected to stay low and flat in 2020. The difference between five and ten-year loan rates is currently only nine basis points, and the difference between five and 20-year loan rates is 21 basis points.
Unfortunately, in 2020, most bank websites are nothing more than brochure-ware. That is a problem as not only can a bank’s website be its most efficient source leads, but it should also be the best source of conversions (leads that turn into new accounts and loans). While there are several hundred banks that do handle online lead gen well, it is even rarer to have a bank generate leads from its mobile app. This is also a problem as some banks are now generating the bulk of their digital leads from mobile, not to mention the bulk of their conversions.
Last month, the Federal Reserve released its 7th, tri-annual U.S. payments study, and, as usual, it had some eye-opening trends that all banks need to consider for their long-term strategic planning. For example, while consumers have always said they preferred debit cards over cash, last year was the first year in US history where consumers used their debit cards (28% of all transactions) more than they used cash (26% of all transactions).
If you are like most banks you have your credit approval and risk process based around loan size. The assumption is that the larger the loan the more risk the bank is taking on so a greater level of risk review is needed. But, suppose the data didn’t bear that assumption out? If that assumption is wrong, then that means that your bank is probably underpricing the smaller loans, overpricing the larger loans, applying the wrong cost structure to the larger loans and misaligning risk against your capital.