New customer satisfaction data suggests that home equity line of credit lenders can safely turn much of the origination process over to technology and keep borrowers happy, with one caveat — early-stage interactions, where the personal touch can make a major difference, a J.D. Power survey found.
“In general what we saw is that the customers were not particularly satisfied with the digital experience, the online platforms for research and shopping,” said John Cabell, global business intelligence practice leader. “The presence in the initial application process, the initial follow-up, the more advice oriented conversation is the place where it makes the most sense to have the person-to-person contact.
“The other parts of the application process like submitting documents and completing the application can be digital and not really detract from customer satisfaction.”
The consumer desire for a mix between digital and personal contact echoed the findings of J.D. Power’s Primary Mortgage Originator Satisfaction Survey.
Those HELOC consumers that were restricted to an online-only experience gave the process an 819 satisfaction score, compared with 836 that had an all in-person experience. Those lenders that were able to provide the consumers with the needed information through both the digital and in-person channels got the highest satisfaction score at 864.
“The HELOC industry is not cutting edge on their digital platforms, so most of them end up having some sort of mixed interaction model,” he said. There are fintech firms like Prosper looking to break into this business either directly or working with banks, but none made the J.D. Power rankings because of a lack of share. But that is likely to change over the next couple of years, Cabell added.
The rising interest rate environment, which normally is considered beneficial for home equity lenders, is a big concern for borrowers, so much so that they looked at other kind of loans.
Approximately two-thirds of HELOC borrowers surveyed that obtained their loan in the past two years considered getting an alternative product, compared with 41% of customers who opened their account 10 or more years ago.
This was true for younger customers, those under 40, which on average looked at 2.5 alternatives to a HELOC, such as personal loans, credit cards and cash advances.
Those that looked at these alternatives were most concerned about the variable interest rates typically associated with the HELOC product, getting overextended with debt and a higher payment required after the draw period ended.
“So a rising rate environment can fuel that concern about a variable rate and cause them to consider fixed-rate options,” Cabell said.
Consumers whose HELOC account is over two years old had lower satisfaction with their lender, with an average score of 830, than more recent borrowers, 842.
“There seems to be some gaps for those customers in terms of understanding of the product offerings and features as well as their satisfaction with the digital experience,” Cabell said. So HELOC lenders must “work to build a relationship and continue to engage users so they can remain advocates of the brand.”
By lender, Regions Bank had the highest satisfaction score at 869, based on a 1,000-point scale. It is the only lender in the five circle category, which J.D. Power defined as “among the best.” It was followed by Huntington National Bank at 860 and BB&T at 846, in a grouping that Power labeled as “better than most,” along with PNC and U.S. Bank. BB&T’s merger partner SunTrust ranked sixth with an 834 score, the highest score in Power’s three circle “about average” grouping.
The industry average was 831. Wells Fargo was at the bottom with an 803 score, followed by Citi at 810, the only two banks in a grouping that Power called “the rest.”