The Risk of Non-Traditional Financial Institutions

Posted on

June 3, 2021

by

Angela Applebee

Car buyers and home buyers looking for credit in today’s market are swamped with the media blitzes coming from huge non-traditional financial institutions (FIs). Some of these companies spend more than $100 million a year on advertising. This figure is one that more traditional FIs may not be able to compete with - unless they find the proper tools.

Fortunately, through targeted messages and contextually relevant notifications, like those enabled by Larky, traditional FIs can compete in this market and provide real value to their account holders.

The rise of non-traditional financial institutions

Probably the most well-known of the non-traditional lenders are the online car dealers. Their advertising claims that they have re-invented the process of buying a car by taking it entirely online. A large part of their appeal is the ability to find out the client’s pre-approved price range. After confirming that price range, the company can let the client know what it is to ease the shopping process. Then, when the buyer makes a decision, they can finance the client's purchase as part of that same online process. This speed and convenience are highly attractive to younger buyers.

There are now similar non-traditional mortgage lenders as well. Like that of the car lenders, their main appeals are speed and the emphasis on self-service. However, these lenders get many bad reviews for poor customer service and slow closings. They also offer fewer lending options than many other lenders. These reviews are especially sharp on the lack of transparency in rate discussions.

Can traditional lenders keep up?

The online car dealership process, like those of other non-traditional lenders, does have its limitations. Most important, of course, is that they usually only finance purchases of the cars that they sell. Also, they do offer an easy pre-qualification process without credit score impact. But, they don't always offer competitive terms.

In other words, a traditional lender may ask more of an account holder, but it also offers more.

Ultimately, non-traditional financial institutions are known for their quick loan pre-qualifications and approvals. But, they are also known for inefficient and slow closings. Plus, they tend to offer fewer options than traditional lenders.

Traditional FIs have the advantage of knowing their account holders and being able to tailor a loan to their needs. So, they can capitalize on those aspects to stay competitive.

How traditional lenders compete in this environment

FIs have an existing relationship with their account holders. They can use that relationship to offer a broader and more informed range of services to them. Further, because FIs want to keep them as account holders, not just score a loan, they can stress their good service.

There are also ways to add the speed and efficiency of the non-traditional lenders to a traditional FI's system by adopting some of their technology. To begin, make the institution a digital institution.

The Larky nudge® engagement platform offers FIs the ability to use immediate information to compete with the $100 million ad budgets of their new competitors. The major appeal of non-traditional FIs is convenience, and the Larky nudge platform® provides just that: convenience, relevancy and value.

Account holders can receive real-time and real-place lock-screen notifications that offer contextually relevant financial opportunities. For example, using geo-notifications, nudge can notify an FI's audience of their auto loan campaign once the account holder is near a car dealership.

The audience gets the information they need the moment they consider a purchase. They'll know right then what the FI can do for them. And they get a chance to contact the FI before going down the road with a non-traditional lender. The Larky nudge® platform helps FIs connect with account holders and build engagement and loyalty.

Contact Larky today

Once you have an account holder's attention, you can use your flexibility, broader product range and your pre-existing relationship to capture their loan business. You may not have a $100 million ad budget like non-traditional financial institutions. But, with the help of the Larky nudge® platform, you can win an account holder's business. For more information about Larky, please contact angela@larky.com.

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