How milestone-based maturity can affect your bottom line | Blend

How milestone-based maturity can affect your bottom line

Are you “digitally” mature? If so, Forrester research suggests your business may be outpacing competitors with less developed milestone-based strategies.

Financial institutions that have built out the necessary digital capabilities to support a milestone-based lending strategy experience better business outcomes than do other FIs. That was one of the findings of a recent study, titled How Banks Create Sustainable Differentiation With Milestone-Based Lending, conducted by Forrester Consulting. Blend commissioned Forrester to study how lenders can better engage consumers by aligning their engagement strategies with the milestones, or key events, in consumers’ lives.

We believe these findings validate something that many at financial institutions have learned over the last decade. New technologies introduced into the financial space have fundamentally changed the relationships between consumers and financial institutions by expanding the number of touchpoints and self-serve options available. Not only are financial institutions better equipped to meet the needs of their consumers, but consumer expectations have also increased.

What is milestone-based maturity?

To measure the milestone-based maturity of FIs, this study focused on three pillars of milestone-based excellence: personalization, cross-product decisioning, and product configuration/customer experience. Maturity in milestone-based lending involves mastering the capabilities across these three pillars.

  • Personalization: How well can the FI tailor offers and experiences to customers?
  • Cross-product decisioning: How well can the FI make credit decisions in real-time in order to create a better customer experience?
  • Product configuration and customer experience: How well can the FI quickly launch and adjust products to meet changing customer expectations?

For the purposes of the study, Forrester asked financial leaders to assess their institution on each dimension. Forrester then used these results to create a maturity model. Those financial institutions that scored in the upper 40% across these dimensions were rated as “high-maturity” while those that scored below average were rated as “low-maturity.”

High milestone-based maturity is linked to improved business outcomes

When asked about business outcomes, the difference between high- and low-maturity FIs became apparent. For example, when asked how their company performed against revenue goals in the previous year, leaders at high-maturity FIs reported meeting or exceeding them at a higher rate than did low-maturity FIs across a number of dimensions.

Chart detailing milestone-based maturity and its outcomes
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The chart above shows the percentage of FIs in each cohort that reported “achieving” or “overachieving” on performance goals. The differences between the outcomes for the two groups is stark.

Most notably, customer loyalty and retention goals were 300% more likely to be accomplished by a high-maturity institution than by a low-maturity one. High-maturity FIs were also much more likely to report improving marketing efficiency and reducing costs than were low-maturity institutions.

Ultimately, this suggests that there is a strong incentive for financial institutions to begin investing in their own maturity to achieve their business goals and remain competitive with other institutions that are investing in these capabilities.

High-maturity FIs dedicate themselves to milestone based lending

When looking ahead, the Forrester study found that “respondents from high-maturity FIs were 60% more likely than those of low-maturity FIs to say that milestone-based strategies are important or very important to their bank’s success.” As a result, 72% plan to increase their investment in milestone-based strategies through 2022. This suggests that the gap may continue to widen between those who are investing in milestone-based strategies and those who do not.

For more on this deep dive into financial institution maturity, read Forrester’s Spotlight for additional data and recommendations based on Forrester’s full survey of banks and banking customers.

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