This piece originally appeared in the May 2022 edition of MReport magazine, online now.
When I founded Roostify in 2012, I was on a mission to help lenders create more consumer-friendly experiences for their home lending products. As a first-time homebuyer in the digital age, I was appalled by the lack of a consistent, transparent digital experience when getting my first mortgage.
Ten years later, just having a digital consumer experience is no longer enough to keep up with expectations. Consumers, particularly first-time homebuyers who are unaware of the hassles of the traditional lending process, will expect an experience in line with their other online transactions. Proactive, friction-free, and personalized. So, the root problem lenders need to solve remains the same as 2012. However, consumer expectations have grown exponentially as digital experiences have increased dramatically in quality, ease, and speed over the last few years.
Lenders need to think of their home lending channels as an opportunity to differentiate themselves, especially as we look to a compressing market in 2022. As competition for the consumer increases, a sleek and sophisticated digital experience is, of course, critical. Still, with advances in data and analytics, lenders have an opportunity to go further and delight their customers.
Essentially the mortgage process, as it stands today, is about lenders answering questions to assess risk and ensure the salability of the loan on the secondary market. Digital advances over the past 10 years have taken that list of questions and allowed them to be asked and solved on an online platform, reducing operational burdens significantly and only slightly improving the consumer experience. But at the end of the day, a digital 1003 is still a 1003, which doesn’t offer a significant improvement from a customer’s perspective.
Think of it the same way as a paper job application. An online version removes a few irritations, i.e. “I can apply from anywhere,” but it also adds a few more points of friction, i.e., “I need to create and remember a username and password.” Simple improvements like browsers being able to save and autofill basic information or data imported from a resume uploaded make a real difference. But the experience continued to evolve, and new platforms like LinkedIn leverage existing digital data to offer a “one-click-apply” for employers. Taking this example one step further, platforms like this now use available data about job seekers to proactively share highly personalized opportunities automatically.
This type of evolution may seem distant for the far more complicated mortgage industry that is still struggling to get an end-to-end digital experience implemented. Still, with the consistent and opportunistic investments in data and analytics to understand potential and active borrowers, it could be right around the corner. I visualize a version of our industry where lenders send pre-approvals to consumers before they even know they are looking to buy, refi, or take out equity. Lenders should start preparing their tech stacks now to make sure they have the flexibility to personalize the process for their customers.
Unlocking More Consumer-Friendly Lending With Behavioral Data
The goal of the mortgage process is to make data-validated decisions. Today that data is basic, captured inefficiently, and doesn’t tell a complete story about the borrower, their property, or their situation. For the most part, lenders are capturing only the data needed to answer the questions required by their underwriters. Some of it comes from integrated sources, some from the borrowers, some manually entered. Still, all of it focuses on what the lender needs, none focused on improving the overall experience for borrowers.
With the rise of digital lending platforms, lenders should monitor user behaviors to improve the experience in real-time. Then, further analyze that data in aggregate to optimize their lending channel strategies and workflows. A deep understanding of how their customers interact with their lending process and making strategic decisions based on that understanding can deliver a significant competitive advantage.
Friction Points and Remove Obstacles
Analysis of behavioral data in aggregate can show lenders where customers are getting stuck in the process most frequently. Once friction within the customer journey is identified, lenders can address it. Lenders can take steps to help borrowers have a more effortless experience. For example, suppose a lender can see that 30% of prospective borrowers leave the application when a tax document needs to be uploaded and never return. With that information, the lender can change where this step occurs, add an option to integrate to a digital tax record provider or provide more precise instructions on what is needed. Keeping your customers engaged and well-informed will increase overall conversion rates.
As this analysis becomes more granular, the experience will become more personalized. Using the example above, let’s say that of that 30% of borrowers not converting because of their tax document upload, 90% have never spoken to a loan officer in the process. That might indicate that the problem isn’t consistent across your digital channels but is specific to self-service. Perhaps you may want to edit only the workflow that serves this channel. There are many possible ways to address this conversion issue. Still, this lender leaves potential leads and, ultimately, dollars on the table without granular behavioral data to find and diagnose.
From the consumer’s perspective, this could mean less time to close on their dream home. Instead of getting frustrated with the process, they feel like they’re making progress toward a home purchase, keeping them engaged and converting.
Build a More Supportive Experience for Borrowers
Keeping online mortgage applicants in the sales funnel should be your primary goal until they hit that submit button. A survey conducted by McKinsey found that reassurance, transparency, simplicity, and speed are the most critical aspects for a customer during their mortgage journey. When borrowers come across roadblocks like complex terminology or complicated concepts in their mortgage that disrupt their application, they may become distracted from the process. Additionally, what happens when those people open up a new browser tab to look for information? They may find the answers they need relatively quickly—but they’ll also see advertisements from your competitors.
Contextual help within the application can answer commonly asked borrower questions for them—reducing the likelihood that your borrower will click away to look something up. Provide your customers with clear next steps by keeping their online mortgage experience streamlined and straightforward.
Layering behavioral data with existing contextual help resources in your mortgage process will also help to make the experience feel personal. For example, if a borrower stays on one page for too long, maybe a pop-up offers to connect them with a team member, or a chatbot comes in to help unblock them. All borrowers will have different needs and questions. Lenders need to understand how and where they can best support and nurture their prospects to increase conversions and gain more business.
Predict Conversions Upstream
For most lenders, the first engagement consumers have with their home lending brand is in the shopping phase. Today, mortgage consumers typically do research online to learn about their options before engaging with a specific lender. Start building brand equity early by enabling consumers with intuitive self-serve experiences, like loan calculators and educational resources. Experiences in these early stages can also capture behavioral data to help you assess how serious a prospect is about moving forward with an application.
However, when consumers encounter outdated information and obscure menus, they may leave and never come back. Behavioral data is critical in understanding these touchpoints and how each influences prospects’ next move so lenders can optimize tools to reach their lending goals.
Increase the Customer Lifetime Value
With a deep understanding of the borrower’s journey, you can fine-tune each step between attracting potential customers and closing loans. Borrowers who have felt like their mortgage journey was easy and personal will keep coming back. In addition, lessons gleaned from behavioral analytics can help you keep your customers happy over the long term.
A first-time mortgage customer might be interested in other financial services and products months or years down the line. Analytics will help you understand when to approach each customer with new offers, increasing their lifetime value to your organization. And as you retain existing customers, you likewise increase your chances of generating new referrals from those same satisfied customers.
The cumulative effect, then, can reshape the growth trajectory of your business. By providing a personal, engaging, and transparent experience to your customers, you drive brand loyalty and increase CLTV.
Executing a Personalized Home Lending Strategy
Customer engagement matters for all businesses—it builds trust, establishes personal connections and company loyalty, and, most importantly, keeps business flowing in. But in the home lending world, borrower engagement isn’t just important: it’s essential. Now more than ever, borrowers hold the power in the transaction. After all, they are the decision-makers in an oversaturated market with unlimited choices and flexibility. If they can’t find lenders who will meet their needs quickly and efficiently, they won’t hesitate to walk away and find a lender who can.
The modern lender has to meet the challenges of the current landscape through meaningful connections and solid engagement right from the start. Otherwise, they risk losing not only the client before them but also the ripple effect of potential referrals. Leveraging behavioral data and insights is a critical step for any lender or bank to inform their decisions and create an experience that meets the evolving needs of their customers.
Further, today’s lenders need to consider how their digital lending infrastructure enables them to change their process in near real-time in response to behavioral analytics. A highly configurable system that can support multiple lending channels and workflows will easily scale as the industry evolves.