What consumer loans does Money Generation want?

Money Generation includes those born between 1980 and 1995. These digital natives are known for questioning the traditional and turning the world of work upside down. The target group is also forcing banks and savings banks to rethink the issue of consumer loans.

Simple, individual, without classic credit card debts – the digital natives pose new challenges in the area of ​​consumer loans

In a trend study carried out jointly by the Starkssen Innovation Hub and the trend office in 2019, we found that Money Generation is very open to digital products and services in the banking sector, but not unconditionally. A concrete added value must be evident, and there must also be confidence in the security of the offer and the provider.

 

Loans must offer security, trust and simplicity

Loans must offer security, trust and simplicity

When it came to security, we found that threats such as hacking and phishing attacks are also well known among young generations. The security of digital financial offers is correspondingly essential. A bank branch nearby increases the sense of security – also within Money Generation. In an environment of eroding trust in the security of established banks, the following also applies: Consumers are becoming increasingly attractive to online banks and fintechs.

Banks and savings banks should not rely solely on the advantage of trust. Digital channels are becoming more and more important, Money Generation expects quick responses on all channels and is ready to take personal advice digitally. Consultants are supported by artificial intelligence and communicate independently of the channel. Fintechs in particular are building closeness to consumers by initially concentrating on niche markets in the credit business and using alternative and more transparent data models for credit scoring. However, our study also showed that a personal contact is still important to the respondents, even if they are used less at the same time.

Simplicity is the third important factor in the success of loan offerings among young generations. A modular structure of products, ideally with the possibility of an individual configuration, ensures simplification, at the same time this supports the trend towards individualization.

 

Money Generation demands radical agility and time savings

Money Generation demands radical agility and time savings

So what will suitable consumer loans look like tomorrow? A distinction should be made between two areas: the “stand-alone” installment loan and the sale of credit products at the point of sale (PoS). With stand-alone loans, comparison portals are becoming increasingly important – if you want to play a role as a bank or savings bank, you have to expect high customer acquisition costs. Appropriate, optimized processes are required to make money at all. The second major pillar in the sale of credit products is integration in the point of sale. In the meantime, this primarily means online PoS – for example, the purchase in installments when ordering from an online electronics retailer.

In the course of the digitalization of banking transactions, loans made directly online are becoming increasingly important. The time until the loan is paid out is crucial for the users. Fintechs therefore create products in which the partially automated approval takes place within minutes. In addition, credit services are becoming more closely interlinked with e-commerce and payment, and consumers no longer perceive the loan as a loan. Amazon’s monthly payment offer is nothing more than a hidden microcredit. Fintech offers, such as spontaneous financing when paying at the checkout through Best Bank or the cooperation of Astro Finance and Agree Bank, also follow this path. 

Focus on customer needs – Money Generation mostly focuses on product idea development in the Starkssen Innovation Hub

 

This is how Money Generation’s credit needs are met

This is how Money Generation

Money Generation wants to consume, but is afraid of classic debts. The digital path to credit and accompanying services are becoming increasingly important for consumers compared to credit products. Here, banks and savings banks have to invest more to meet expectations, but they can also connect the online and offline worlds with services. The openness towards partners leads to innovations and better products. At Starkssen Innovation Hub, the focus when developing product ideas is clearly on customer needs.

A good example is our MOVE tester platform, which has been available to interested savings banks since the beginning of the year. Products and services can be quickly tested and developed together with users here. Of course, this also applies to the area of ​​consumer loans. Our trend study has shown that built trust is an excellent basis for banks and savings banks, but not a guarantee for satisfied customers. For this, products have to be developed and tested together with customers right from the start.

Getting a Loan – Tips and Tricks

Whether buying a house, traveling around the world or planning a wedding – there are many reasons to take out a loan. However, the application and its approval is not always as easy as it appears at first glance. With a few tips and tricks, everyone can still get the desired loan amount and realize all of their dreams.

 

The dreaded Credit Bureau information

apply loans

For many borrowers, Credit Bureau Holding AG is an absolute “fear opponent”. A negative Credit Bureau entry and the desired loan amount is no longer available. But in general, most Credit Bureau entries are positive in nature. Because even positive things, such as fully paid loans, are saved as a Credit Bureau entry. And these then have a positive effect on the loan request. Most banks actually grant loans less if Credit Bureau information is negative. In these cases, they no longer consider customers’ creditworthiness to be a given and classify the risk of insolvency as too high.

For customers who do not receive a credit from the house bank due to a negative Credit Bureau information, there is the option of a loan without Credit Bureau information. A so-called “Swiss loan” makes sense if the customer urgently needs money but the bank does not approve the loan due to the negative entry. Of course, these providers, who are usually based in Switzerland, do not blindly grant the loans. Here too there are certain criteria for lending. These include:

  • Age of the applicant
  • residence
  • Regulated income to be able to repay the installments

Attention: With this type of lending, consumers are required to pay close attention to the seriousness of the provider! Financial service providers who charge fees in advance should be avoided, for example.

A popular goal that can be achieved with a loan: the dream of owning your own home. Construction loans are one of the most common bank loans.

 

Have accurate information ready

Have accurate information ready

Regardless of where a loan is ultimately applied for, the applicant should have some important information ready. Banks in particular continue to expect a personal interview in which the applicant should explain what he needs the loan for. In recent years, more and more people have bought or even bought condominiums or homes. This was particularly worthwhile due to low interest rates. In the meantime, mortgage lending rates are rising again, which means that loan requests are once again devoted to other areas. But here, too, it is helpful to provide clear information about what the money is used for. To apply for a loan, the applicant must be able to answer the following questions:

  1. How much should the loan amount be?
  2. How long should the term be?
  3. What is the sum needed for?
  4. What guarantees are there to be able to repay the money in the agreed time?

It is immaterial whether the applicant applies for the loan privately or for his company. In most cases, only the conditions differ.

 

Compare lenders

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Whether online or stationary: It is worth comparing different providers. From time to time, banks offer offers where borrowers can benefit from particularly low interest rates. There are also many different offers online that are profitable. It is of course just as important to pay attention to seriousness here. Some banks expect the borrower to have an account with the credit institution. This is not a problem either, because banks have had to help their customers switch accounts since 2016. In this way, standing orders switch banks in a few simple steps and customers can take advantage of the new bank’s loan offer.

Suddenly the pockets are empty. People who are over indebted suffer a lot. Personal bankruptcy is only one consequence. Overindebtedness should therefore always be avoided!

 

Caution should be exercised with loans

Basically, borrowers are cautioned. It is all too easy for them to lose track of their finances and get into debt. Then a loan is replaced with a new one and, thanks to various options without Credit Bureau information, a new loan is taken out. In the end, the consumer no longer knows how much money he actually pays back to which bank every month and can no longer raise the sometimes horrendous sums. One possible consequence is personal bankruptcy. 

In any case, consumers should carefully consider whether a loan is necessary to achieve the goals set or whether there are other ways to implement the wishes