Data UsageExpert AnalysisNov./Dec. 2023 Edition

Why Are You Paying For Your Own Data?

In the ever-evolving landscape of lending, data reigns supreme. Accurate, reliable data extraction improves data accuracy, not only driving better decision-making but also laying the foundation for streamlined processes, improved risk assessment, and enhanced regulatory compliance.

However, the landscape is not without its challenges, particularly when it comes to the cost and limitations associated with accessing crucial data. Financial institutions and lenders have traditionally been forced to pay to access even their own data and for services they may not need.

The question then becomes – why?

Mastering Expenditures in Lending is Critical

In the competitive landscape of mortgage lending, mastering expenditure isn’t just a nice-to-have – it’s a must. It’s about more than just cutting costs. It’s about optimizing resources, reducing errors, and increasing productivity, all of which can have a significant impact on a lender’s bottom line. However, financial institutions are up against two challenges.

First, banks and lenders are typically required to pay for their own data, and many vendors are capitalizing on this. This should not be the case. After all, any platform or technology a financial institution invests in will require the data to be extracted, and that platform is only valuable if the data is accurate. This means that the vendor needs the data as much as the lender, so why charge for it.

Accurate data also helps meet regulatory compliance requirements. With fair lending practices under the microscope – along with the practices of the technology vendors who provide services – this is critical for everyone.

Second, lenders are often forced to invest in services they don’t need. For instance, when a lender receives an income waiver, they must pay for an income assessment to get the asset, liabilities, and credit assessment. Instead, lenders should be able to choose – and pay for – only the services needed. This approach provides for greater flexibility, which is crucial in a cyclical industry.

By having greater access to their own data and the flexibility to only select services they need, financial institutions and lenders can control technology spend at the loan level. Financial institutions can also better understand the cost prior to underwriting to measure profitability. The flexibility to use only the component necessary prevents technology overspend and keeps margins intact.

A Paradigm Shift in Data Access & Technology

Lenders need access to their own data and greater flexibility with their technology if they plan to reduce costs and increase profitability. Traditional end-to-end systems come with inherent inflexibility, charging for what lenders already have and often bundling unnecessary services they don’t need.

What lenders truly require is complete data and a revolutionary technological infrastructure engineered with a microservices architecture. This approach empowers lenders with a complete data picture and the ability to carefully select specific components precisely when they need them.

This also eliminates expensive and time-consuming integrations. The modular design of this system allows lenders to tailor high-performance components according to their team’s requirements, specific scenarios, and existing manufacturing processes. Ultimately, opting for a component-based strategy that includes document classification and data extraction streamlines costs and allows financial institutions to better assess expenses. Continuing with today’s outdated approach is not only problematic for lenders, but for the vendors they work with.