Cape Town, 06 Jun 2013
South African consumers are becoming increasingly demanding, expecting to get what they want quickly, efficiently, cheaply and often digitally. According to a survey performed by the Digital Media and Marketing Association (DMMA) in February 2013, 52% of individuals surveyed said they had shopped online in the past year. As Internet connectivity continues to increase, these figures are expected to rise with many South Africans turning to the Internet to meet many of their shopping needs, including shopping for credit, says Tina-Louise Rabie, Marketing Team Leader at Compuscan.
The November 2012 Effective Measure statistics show that 70.16% of South African Internet users use the Internet for online banking. This shows that consumers are becoming increasingly confident and trusting regarding the use of the Internet to meet their financial needs. Likewise, online lending is fast becoming a preferred method of acquiring credit. Online lending is not a new term; however, it is certainly one that has gained popularity in recent years with many credit providers choosing to operate solely in the online space. While it may seem like a futuristic concept, the benefits to both lenders and consumers are numerous.
One of the main reasons consumers turn to the online environment for their shopping needs is to save time. Despite the fact that decisioning tools and automated credit processing systems have resulted in most credit providers offering quick and efficient service, nothing beats the ability to apply for a loan in the comfort of one's home at any time of the day. In today's fast-paced environment, consumers are looking for around-the-clock convenience, and shopping online caters to this need.
Another reason online loans have become so popular in today's society is the result of the human ego. For many consumers, applying for a loan is an admittance of failure. It is an admittance that they cannot make their monthly commitments, that they do not earn a sufficient salary, and that they need financial assistance. With online lending, anonymity is guaranteed. Consumers can apply for the loan from the comfort of their own homes and eliminate the possibility of someone seeing them enter a credit provider's branch.
For credit providers, online lending has a number of benefits. While the initial set-up may be costly, it can often serve as an invaluable tool for those looking to expand their customer base. With online lending, credit providers can drastically expand their reach, as borrowers are served entirely online and thus demographics no longer become an issue. A credit provider based in Johannesburg can serve a consumer in George. Furthermore, while initially offering credit online could serve to supplement one's current lending branches, over time, a move to operate entirely in the online lending sphere could offer massive savings in staffing and office space.
Despite these numerous benefits, lending in the online space is challenging. The Internet has drastically changed the competitive landscape, making it easier for borrowers to compare products, pricing and services. If the product or service you are offering does not match up to that of competitors', consumers will simply leave your Web site in search for an offer that better appeals to them. Unlike a physical branch structure, you will not have the opportunity to persuade the customer to stay or offer him a better deal. Furthermore, your Web site needs to be eye-catching and user-friendly to capture the consumer's attention and ensure they remain on your Web site. If it is difficult to navigate, unclear or unattractive, the consumer will leave. It takes but one click for a consumer to leave your Web site.
Just as with service delivery offline, online consumers no longer want or expect satisfactory service levels; they expect and demand that those they purchase from go above and beyond to meet their needs. Consumers who apply for credit online do not just want easy access to a loan application; they want to be able to compare products and rates, calculate monthly repayments, get personalised interest rates, track their loan status in real time, and most of all, feel like they are receiving fast and efficient service. There are many businesses competing in the online lending space, and if a credit provider does not offer the best product in the most efficient manner, they will lose their customers.
Taking all of this into account, online lending is certainly not the solution for all credit providers. Those that rely on the centrality of their locations and the community in which they operate for business will lose this personal element in the online space. Being the only credit provider in your community or being known on a first-name basis with your customers are marketing tools that cannot be replaced with a Web site.
Ultimately, the lending landscape may dramatically change in the future as many credit providers turn to offer their loans in interesting and innovative ways. The concept of the brick-and-mortar branch may become obsolete or may look more like a social Internet caf'e than a financial institution. Business hours may change from 8am to 5pm, to 24 hours. However, the key to success for credit providers is not to simply follow the herd and do what others do, but rather to make themselves aware of the changing credit landscape and then decide how they will best cement their position within it.
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