What can be said for consumer behavior in one industry doesn’t necessarily apply to consumer behavior in another industry. In order to find out what inspires users to action in consumer finance,BestMoney took a deep dive into 3 very different industries: personal loans, mortgages, and car insurance.
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Personal Loans
Unsecured personal loans have exploded in the past couple of years thanks to FinTech companies like SoFi and Marcus (a FinTech lender operated by a traditional banking institution, Goldman Sachs). According to TransUnion’s latest Industry Insights Report, personal loan originations increased by 21.5% in Q3 2018 compared to the same period in 2017. This marked the fourth consecutive quarter in which personal loans grew more than 20% on an annualized basis. All the other consumer lending categories included in TransUnion’s report either barely grew or contracted in Q3 2018.
In 2013, FinTech companies accounted for just 5% of originations volume. By Q3 2018, they had 38% of market share, while banks were left with 28%, credit unions 21%, and traditional finance companies 13%.
FinTech companies have been better than the banks at leveraging customer data to drive personalized offerings and at providing fast, 24/7 online services that can be accessed from any device, according to the World FinTech Report 2018 from Capgemini and LinkedIn.
These FinTech companies have also been better at adapting to changing user search behavior. Non-branded searches, such as “best personal loans” and “top personal loans,” rose 12% year-over-year in Q4 2018, BestMoney has found. Throughout 2018, the volume of the most common non-branded searches was around 6 times higher than the volume of branded searches for popular online personal loan lenders such as LendingTree and Credible.
When a borrower uses a non-branded search term, this suggests 2 things: before making a decision, they want to learn more about personal loans, and they want to compare lenders.
BestMoney has found that the following types of guides and informational articles address the needs of users and inspire them to action: Do’s and don’ts of taking out a personal loan; guides to personal loans; guides to debt consolidation; and guides on how to calculate your credit score. Brand reviews have the highest yields, with a 14.2% conversion rate, while other types of content typically have conversion rates of less than 10%.
Mortgages
Mortgage lending is a hyper-competitive industry, with no one company able to dominate the market. Around 12,000 institutions originated at least one home loan in 2017, according to the US Bureau of Consumer Financial Protection. Wells Fargo was the largest mortgage lender by total dollar amount of originations in 2017, with 5.6% of market share. Quicken Loans, a FinTech lender, was the largest by number of originations, with 5.4% of market share.
Like personal loans, FinTech lenders have re-segmented the mortgage lending market. In 2008, at the peak of the financial crisis, banks accounted for almost 70% of originations, independents 27%, and credit unions the remaining 3%. By 2017, independent lenders had doubled their market share to 54.3%, while banks had slipped to 39.4%, according to a study by mortgage lending advisory iEmergent.
Millennials, the cohort born between 1980 and 1999 that accounted for 36% of all home purchases in 2018, have been largely responsible for this shift. According to a 2018 Velocify survey, millennials are 45% more likely than baby boomers to find their mortgage lender online. Baby boomers are 87% more likely to stay loyal to their existing lender. Thanks to millennials, borrowers are now 3.7 times more likely overall to find their lender through online research or social media than 5 to 10 years ago.
With brand loyalty on the way out, it’s no surprise that non-branded searches are on the way in. According to BestMoney’s research, non-branded searches for mortgages rose 26% and branded searches fell 30% in 2018. The pace of non-branded searches accelerated toward the end of last year, with volume increasing 37% in Q4 2018 compared to the previous quarter.
Just like with personal loans, borrowers are increasingly looking to learn and compare before deciding on a mortgage lender.
How can brands address this type of user behavior and motivate users to action? When it comes to mortgages, BestMoney has found that the more interactive a page the better. For example, quizzes that take into account the user’s answers before showing them the best lenders have a 10% better click-through rate than a regular chart page. How-to guides do well, although content doesn’t convert as well in the mortgage industry as it does in personal loans.
Charticles, articles that show a chart of 3 or 5 top mortgage lenders, generate the highest yields, with a 48% conversion rate. And all other things remaining equal, pages that show rates convert better than pages that don’t.
Millennials are 45% more likely than baby boomers to find their mortgage lender online.
Car Insurance
Major players have been able to dominate car insurance in a way that hasn’t been possible in personal loans or mortgages, with State Farm, Geico, Progressive, and Allstate together accounting for more than 50% of market share in 2017.
Despite being a relatively consolidated industry, car insurance can be difficult for consumers to grasp due to the extremely different rules and conditions from state to state. For example, drivers in Massachusetts are required to purchase liability coverage, personal industry protection, and uninsured/underinsured motorist coverage. In neighboring New Hampshire, drivers aren’t legally required to purchase any form of car insurance.
To complicate matters further, auto insurance costs vary wildly depending on things like where the policy holder lives, what vehicle they drive, and how old they are. The average annual auto insurance premium in the United States in 2017 was $1,427, according to The Zebra 2018 State of Auto Insurance Report. In Michigan, the most expensive state, premiums averaged $2,610, more than triple that of the cheapest state, North Carolina, where premiums averaged $865.
Given the complexity, it’s no surprise consumers are looking for clarity. BestMoney has found that content that employs infographics and other types of rich imagery to explain the car insurance market enjoys a 40% better click-through rate than text-only content.
Having an online form pop up the moment a visitor enters your site also helps sort high-intent users from low-intent users. BestMoney requires users to enter their zip code the moment they land on its car insurance comparison site. Sixty percent of users bounce off the site automatically, while an additional 10% leave on the following page. A 70% bounce rate might seem high, but the remaining 30% of users are people who show high intent and are therefore highly likely to convert.
How Can You Reach Fintech Consumers?
In consumer finance, attracting users at the right moment is only half of a marketer’s job; the other part is convincing the user to take action. The personal loans, mortgage, and car insurance industries all have an important thing in common: their customers want to learn about their industries and compare service providers before making a final decision. The consumer finance brands that offer users the most pertinent information and the most transparency will be the ones most likely to convert.
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