Nov./Dec. 2019 Edition

Going Digital Is No Longer A Differentiator

The word ‘Digital’ is almost cliché now. Everyone knows about it, and they have all jumped on the bandwagon. If you are an established bank or a lender, you must have already incorporated digital into your long-term strategy, and you are most probably thinking: “Oh, you mean that ‘everything-online,’ ‘integrated customer experience’ and ‘connected enterprise’ thing? Yes, we have a plan for that.”

Unfortunately, the brash new startups that are entering the lending scene are not thinking that way. For them, online and connected are already a given, the bare necessities. For them, ‘Digital’ is a means to ‘Disruption.’ You have surely come across some of the more famous ones among these upstarts, right?

Are you familiar with ‘Kabbage,’ the lending platform that offers nearly instant loans to small businesses, based on creative, alternative data – like the number of UPS packages sent or received by the industry?  Or ‘Tala,’ which approves microloans for borrowers from underserved economies who lack credit history by crunching out myriad data points ranging from financial transactions to mobile games played? And what about the aptly named ‘Upstart,’ which uses data such as education, employment history, and whether applicants know their credit score to underwrite and price loans? Upstart’s algorithms are supposedly so well-trained that they now approve 47 percent of loans with zero human intervention and yet manage to have one of the lowest default rates in the industry.
Get digital already.

Going digital is no longer the endgame. It just places you at the start-line for the sprint towards innovation and disruption. Therefore, if what you have is a long-term, multi-year digital roadmap, you have lost the race even before you have started. You need to go digital right now—within weeks—so that you can compete on level terms and give yourself a chance to race with (and fend-off) these new-age disruptors.

If you are a bank or a lender with HELOC offerings, product suites can help you do just that. It offers a ready-to-use toolbox of services, integrations and interfaces that propel you instantly to a fully digital-ready enterprise within weeks. Do not waste your time and energy on determining how to get digital. Tavant has that covered; you can now focus your precious resources on figuring out how you will unleash the power of digital for innovation, disruption and market leadership.

Customers don’t need to be wowed. They’re incredibly busy. They just desire a streamlined experience, at any given moment with quick and seamless resolution. Needless to say, they are looking for an easy, personalized, connected and consistent experience. The value of focusing on your customers’ journey can’t be understated. Done correctly, it helps make your marketing feel more like matchmaking and builds a lasting relationship between your customers and your product.

As the old adage goes if you don’t understand the customer journey and evaluate how, why, when and where customers are interacting with your brand, you cannot influence them. This holds true with today’s digital customers; ultimately, you will fail miserably to meet their evolving needs. Thanks to digital and social media, the customer’s intolerance to brands that get their engagement strategies wrong is growing significantly.

Digital age customers expect hyper-personalized user experiences when they interact with a particular brand, including high-value communication across multiple channels and devices. Customers are now much more savvy, more agile, more independent and more complex in terms of what they look for to help make their purchasing decisions and their behaviors are increasingly inconsistent and harder to predict – in contrast, the marketer’s traditional approach to defining their target audience, planning and executing campaigns is struggling to keep up. A consumer’s real, personal journey of self-improvement is constant throughout that individual’s life. The need to understand the customer journey through your product and service experience has been widely heralded as a fundamental component of marketing for years. Those companies who fail to unravel the mystery behind the customer journey cannot strengthen their bond with their customers.

However, the actual term customer journey is broken. This sounds cliché, but the complexity of customer journeys coupled with multiple broken, disconnected channel partner networks is impeding organizations from delivering personalized customer experiences.

In today’s data-rich world, the customer journey is undeniably too high level, too generic, and too prescriptive. It’s incomplete, rarely actionable and hence it is said to be broken. The focus of tomorrow’s marketer, therefore, needs to be less linear, segment focused and personal. Delivering a seamless experience at every phase of the customer lifecycle can bolster a brand’s relationship with its audience and it requires an ample amount of data and a thorough understanding of the customer journey.

While its fashionable to focus on a digital customer journey, and indeed the last 48 months have seen significant investment in digital and self-service options, the mortgage industry is unique in terms of customers requiring a balanced, and appropriate, combination of the digital and human experience. Providing mortgage loan originators with digital tools that drive higher touch with higher efficiencies could change the customer journey: building a high-touch experience without being intrusive, with the high-tech environment when consumers demand it. 

Dynamic Capacity Management

Technology spending in the fintech industry has put pressure on even the biggest banks to compete with the likes of J.P. Morgan’s commitment to spend $10.8 billion on technology in 2018. The SunTrust, BB&T merger created the sixth biggest U.S. bank and was driven largely by the need to compete on technology.

A recent study by the Federal Reserve Bank of New York has found that the market share of fintech lenders jumped nearly 6 percent in recent years. Mortgages offered by fintech lenders close about 20 percent faster than others. Additionally, the default rates for loans issued by fintech companies are 38 percent lower for purchase loans and 29 percent lower for refinances.

These lenders also appear to alleviate capacity constraints during periods of high mortgage demand. The mortgage market isn’t helping productivity, swinging as it has quite dramatically in the last six quarters. This last year and half has been a wild ride – interest rates increased and as these rates go up refi opportunities go down, and in a lot of ways so does the purchase market. That market alone has seen a total swing of negative 41 percent in the past six quarters. These switches require organizations to rapidly move focus from one channel to another, necessitating a complete recalibration of services, which puts a tremendous amount of pressure on operations. Managing huge workflow swings and recalibrating skills and operations to anticipate for 25 to 40 percent market swings is a hard problem for which to solve .

Dramatic market swings require dynamic capacity management.  And in this vein, automation, and even more so AI, are key. Being in a position of agility and flexibility with the ability to very quickly move from one market to another is a very difficult position. A lot of the time, the folks working these shifts are in a “manufacturing” state of mind: working the same function to produce the same result over and over again. Encouraging these folks to shift can be a challenge.

While the lending industry has shown a lot of excitement about AI, actual adoption is low – less than 1 out of 4 lenders have even experimented with AI. Robotic process automation has reached slightly higher levels but is also at its nascent experimentation stage. Both AI and automation require some basic plumbing: open architectures supporting standards, driven data APIs combined with an engineering approach to assemble processes and data across diverse systems.

Changing the Customer Journey

Integration among disparate systems can unify the mortgage loan originator experience. This single pane of glass system is a critical driver towards LO efficiency. Well-integrated systems that present a single view of customers and processes can help resolve both the efficiency of loan originators and the experience for customers. An average loan originator operates across at least three different systems, often moving data or waiting for data to be moved within CRM systems, product or pricing platforms, LO POS and LOS. This is without counting the productivity systems and company portals, IVR systems, and company portals for financial, HR etc.

Nine in 10 lenders do not have personalized mortgage loan originator driven marketing activities. In addition to this, five out of 10 lenders do not execute a closing call by the LO – this singular exclusion results in a 50 percent drop in the “willingness to do business again” indicator.

Lenders tend to take a loan-centric view of their ecosystem which percolates into the way different departments steward the loan process. Because of this, lenders can miss out on stewardship of the customer experience. It is possible to influence consumer behavior through a well-engineered journey that keeps the focus on that consumer. This requires integrated communication interfaces between systems to share status, data and messages, as well as intelligent automation that reduces the orchestration required as control moves between channels. 

Indeed, a well-integrated solution would need to support multiple channel models with multiple broader financial services LOBs: at least two to three major departments with different outlooks towards the process they operate would need to be supported. Any solution must have the flexibility to support integrations to diverse systems, both internally and externally, throughout the customer lifecycle. A scalable, performant, and secure method that makes it easy to deploy, manage, maintain and tweak for variations in the customer process. The human element must be combined with a sophisticated digital experience delivered at the right time, with insightful and engaging components. Lenders can change the customer journey with high-touch and high-tech while reducing the sales and marketing costs that continue to drive the largest part of origination costs.