How can better customer experiences mitigate mortgage churn

Predicting home buyer needs and exceeding expectations is more pertinent than ever across the Banking sector. This is because there is a perfect storm brewing which is driving a rapid increase in mortgage churn and putting the FSI sector’s most significant book of business at risk.

There are several factors converging to disrupt the industry and drive a significant number of customers to look for a new mortgage provider.

Just two to three years ago, home loan interest rates were at all-time lows, prompting many customers to re-mortgage and take advantage with fixed term interest rates. Fast forward to today, those customers’ terms are maturing, and they are coming off those low fixed-interest rates at a time when rates have sky-rocketed, forcing many to go back to market for more competitive rates.

These interest rate challenges are further compounded by strong socio-economic headwinds–rising inflation and cost of living pressures and forcing families to reduce spending in all categories, including mortgages. This is occurring at a time where housing prices have continued to spiral upwards, leading to challenges in areas such as Loan-to-Valuation Ratios and Debt-to-Income Ratios, making it harder to borrow the amounts required to buy a house.

The result is an exponential number of banking customers who are in-market or are soon to be refinancing with another mortgage provider. As today’s sophisticated, tech-savvy customers research and shop for home loans, they are constantly bombarded with instant mortgage product promises, lower, more competitive rates, and better personalised service.

With home loans being the most significant book of business for all big retail banks in the APAC region, win-back campaigns used to reengage customers who have already found a new mortgage provider will no longer cut it and are often more costly than retention efforts.

These campaigns fail to realise the indicators of a dissatisfied customer, and often, efforts can be too late to make an impact. If a customer is tired of frustrating experiences, it doesn’t take long for them to find a better alternative. In fact, 55% of customers will actively switch brands to get a better experience because the truth is you can’t count on loyalty if your customer experience is not up to par.

To stem the flow of customers churning, Banking and Financial Service Institutions must adapt swiftly by paying attention to changes in customer needs, wants, and goals–and they must do so before customers make the switch, by utilising customer insights and enhanced experiences powered by digital interaction.

Driving loyalty, retention and brand advocacy through personalised experiences

Few industries have the potential to enjoy deep, lifelong relationships as banking and finance, due to the nature of the product offerings and the volume of data available to them. Customers are already experiencing personalisation done well outside financial services and are increasingly expecting more from FSI providers. Yet, according to the Adobe Digital Trends 2023: Financial Services in Focus report, only 36% of providers believe they are meeting or exceeding customer expectations.

To remain engaged with their customers, Financial Service brands must connect, harmonise and mobilise data across the entire customer journey. Using a Customer Data Platform, FSIs can access customer intelligence that is actionable, real-time and provides a rich understanding of each customer.

In addition, by leveraging real-time events and triggers they can prioritise decisioning based on individual consumer’s current needs. By integrating previous behaviours and harnessing AI to anticipate future needs, these brands can identify which customers are at risk of churning at a one-to-one level, but also the reason driving their churn behaviour.

Armed with the insights of which customers are at risk, and the factors putting them at risk, banks can deliver experiences with personalised content and offers that assist the customer with challenges such interest rate driven defaults, before the customer even considers churning away to a competitor. Additionally, this level of proactive personalisation makes customers feel valued and appreciated and helps build trust and loyalty for the bank.

Top 3 considerations to nurture lifelong customer relationships

Imagine if you could flip the script and predict and prevent customer churn before it’s too late. Here are three ways “don’t lose” campaigns can prevent mortgage churn before it happens.

#1 Predict customer needs and personalise content experience

Using technology like a Customer Data Platform (CDP) democratises data and lightens the load to help you understand it. Additionally, with a real-time CDP, in-the-moment customer behaviour and sentiment can be combined with first-party data to anticipate future needs and proactively provide product recommendations, personalised content and offerings.

Finding customers who are at risk of churning, with individual level explanations, moves far beyond the traditional method of campaign segmentation, facilitating personalisation at a one-to-one customer level.

#2 Make relevant offers

The moment you understand a customer through a unified customer view and real-time insights, you can orchestrate messages and offers that are personalised and consistent across all touchpoints. AI can help to add real value to each unique customer by using automated decisioning, experimentation and intelligence to always deliver the “next best experience”.

#3 Provide innovative products

A deeper understanding of each customer, their financial history, behaviour and goals combined with first party customer data allows you to know which product offering is most relevant to each customer to solve their individual challenges. Intercepting customer churn by proactively proposing a more appropriate offer, even before they look for it themselves, drives retention and builds stronger customer relationships and loyalty.

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