Editor's note: This article appears in the April 2021 issue of MReport, available here.
Every lender we speak with wants to be viewed by those they serve as an innovator in the mortgage space. They know that remaining rooted in the past is simply not an option, even when they boast a long tradition of successful customer service. Many competitors are offering their customers something new.
As a result, we have conversations every day with mortgage lending executives who are eager to innovate, mindful of limiting their institution’s exposure to risk while meeting changing consumer demands.
Too often, those conversations focus solely on upgrading or otherwise updating the mortgage lender’s existing older technology. While this may be an option, thinking about innovation through a single channel, device, or platform is a mistake.
Instead, we advocate a holistic approach to the technology roadmap. We sometimes get raised eyebrows at this point, so in this article I will explain exactly what we mean and why this is the key to innovation for lenders.
Why a Holistic Approach?
Busy executives achieve success by creating strong processes and establishing good habits. Productivity often results from not having to think too much about the work when you really need to just get it done. It can take a disruptive event to knock us out of our routines.
That’s what happened when the COVID-19 pandemic struck. Suddenly, thousands of mortgage lenders’ employees across the country were separated from their work terminals and companies had to quickly adapt to accommodate remote working.
In the tech industry, remote working is the norm and has been for a long time. COVID-19 taught the mortgage lending industry that they could apply a similar working model successfully.
Overnight, IT departments were thinking beyond their old client-server infrastructures and factoring in data delivery to a host of new devices. As a result, initiatives that had been languishing within mortgage lenders for years were suddenly mission-critical.
There is an opportunity for financial institutions (FIs) to innovate and consider ways to improve communication, e-delivery, and social media use to appeal to an ever-growing market segment, the millennials. As technology continues to advance, we will continue to hear consumers demand delivery of information to their smartphones to communicate with their institutions.
FIs are not just in the financial/mortgage industry, they are now competing in the software space. Their competitors include Silicon Valley startups that are ready to provide financial services in a segment that is growing exponentially. Fintech startups bring agility and technical know-how, and will continue to push larger fintechs to innovate.
While millennial customers were the first to demand a multi-channel experience, as they had been pushing for greater access to their accounts through multiple channels for some time, older customers are also expanding beyond the desktop and requesting information via handheld devices. That genie is now out of the bottle. There is no going back.
Today, every device and channel that will contribute data to the institution must be considered as part of a lending strategy, along with every path from which that data will flow to partners, customers, and regulators. It’s no longer about a single-node delivery system. Forward thinking requires consideration of all the different methods through which customers want to communicate and the ability to deliver information on any device while providing a consistent experience.
Taking a Different Approach
Traditionally, mortgage lenders have constructed their technologies inside building and wired desktops from central servers to allow their people to do business. In the past, this was a viable option. Those days are now far behind us.
By the turn of the century, distributed data centers run by some of the world’s largest and most trusted technology companies were hosting more lending applications. Today, and for much of the past decade, Software-as-a-Service (Saas) offerings through these public clouds have become the gold standard of delivery for companies in virtually every industry.
Among the many advantages we have seen coming out of this shift has been the rise of the Application Programming Interface (API), which allows a user to access technology in the cloud in a safe and secure manner to extract data from disparate systems.
A major advance from the older Software Development Kits (SDKs), which were designed to make it easier for programmers to hard code integrations between systems. APIs changed everything about the way we deliver services, including mortgage loans, and opened the door to digital lending.
Today, a robust API ecosystem allows an institution to connect electronically with other organizations and utilize the tools others have already built. These integrations mean the lender doesn’t have to buy or build these tools themselves.
On the mortgage side, we’ve been connecting our LOS to preferred document prep partners for years. The new APIs make it easier than ever to get our data onto the right documents for borrowers, helping ensure accuracy and compliance along the way. More recently, API integration with eSign providers allows borrowers to review and sign their documents from anywhere at any time on any device.
Taking full advantage of these innovations requires the lender to map out their technologies holistically, taking all of these potential capabilities into account.
We are now past the early adopter segment of the SaaS curve. Now is the time for institutions to take action.
What is the Risk of Not Changing?
Today’s mortgage borrowers expect their financial institutions to serve them where they are and when they want. They may be on a smartphone in a city park or a tablet PC in a coffee shop. Companies that are unable or unwilling to serve them there will inevitably lose market share.
This was happening long before COVID-19, but the global pandemic advanced the digitization process through the daily habits of consumers. When branches closed and consumers were forced to conduct business online, over the phone, or through a drive-thru, some initially grumbled. However, having sampled the new way of transacting, most will never go back.
A holistic technology roadmap takes this into account and allows the lender to meet the needs of its customers and mitigate the risk of losing them to more nimble competitors.
How to Think Holistically
When we talk to executives about this holistic approach, we find the conversation moving in one of two directions.
First, IT executives want to talk about tools. The tools and approaches an organization use are important, but it’s more about how they are applied to the institution’s value proposition and how quickly IT teams are expected to move.
With a holistic approach, multiple delivery streams are detailed on the roadmap, involving a number of devices and channels. It’s not uncommon to see IT teams generating code and hitting commit to put it into production multiple times each day.
We’ve worked on projects where we go from tested code to production workflow in eight minutes.
On the other hand, when we talk to the executives in charge of products, the conversation will focus on the lender’s ability to deliver but also the cost savings that come out of a holistic approach.
They understand the excitement in the IT department and also like the idea of speed to market, however are careful not to commit too many resources too quickly. This can create a situation where the institution lacks the skill set and tools to compete because the investments haven’t been made.
This is understandable. After spending most of their careers studying spreadsheets and working to keep their operations in the black, shifting resources into uncharted territory can feel overly risky.
The truth is that failure to spend money on R&D now will prevent the lender from attracting the kind of leadership in the engineering space they will need to succeed. That’s a real risk lenders face today.
How a Holistic Approach Enables Future Success
In many ways, the holistic approach to an institution’s technology roadmap is a shift from thinking about one technology and delivery channel over the next five years to thinking about every technology and delivery channel over the next six months.
Technology is changing so quickly that we are now seeing disruptive changes multiple times each year. It’s no longer possible to predict what the business will look like in five years, three years, or even one year.
Financial services executives must be nimble, flexible and able to pivot quickly. They must think about innovation holistically, in smaller steps taken over shorter time frames.
Long-term planning still has its place in the modern enterprise, but in a fast-changing environment, leaders will create holistic technology roadmaps that take into account a broader range of tools even if their plans are subject to revision in the near- or mid-term.