As seemingly every other part of our lives has become digitized, it was only a matter of time before all of the processes related to applying for a mortgage (including processing, underwriting, and selling) became digitized, too. Our industry has been abuzz with chatter about digital mortgages since long before the Great Recession. Over the past three years, a handful of lenders have emerged as pioneers, many partnering with fintech providers to reimagine their product strategy. These early endeavors have offer valuable lessons, but more importantly, have helped the industry come to the consensus that the future of mortgages is digital.
Data indicates that customers have a strong appetite for digital mortgage products. According to a study by J.D. Power , 43 percent of borrowers applied digitally in 2017, versus just 28 percent in 2016. As a result, digital mortgage lenders have quadrupled their market share in eight years – going from only two percent in 2010 to eight percent in 2018, a report by the Federal Bank of New York showed. Every phase of the mortgage process has grown in online loan activity—from research and discovery to application, qualification, and approval, as well as risk and compliance. Because customers now have unprecedented choice and bargaining power, mortgage companies will need to work harder to improve their competitiveness, provide better options for customers, and of course, increase their digital presence.
Although further progress still needs to be made before we see a fully digital mortgage, we have already seen benefits. Lenders are starting to meet borrowers’ expectations with many self-service opportunities. Quality control and compliance are improving due to more accurate data and fewer opportunities for human error; and, processes are becoming more streamlined, as evidenced by decreased time to close. And now, the next phase of the digital mortgage revolution is starting as firms are beginning to apply machine learning and artificial intelligence, for enhanced analytics and decision making.
Amidst this revolution, lenders with a robust digital strategy have gained a competitive advantage especially considering long term operational cost savings and the use of advanced data analytics to improve the end-to-end process.
So, for those that have not yet developed a digital strategy and roadmap, the time to do so is now. While the task can seem daunting, the right strategic partnerships and aligning with the broader corporate strategy make it possible. One key lesson learned from early entrants that fast followers can benefit from involves a choice of technology. Lenders must consider a long-term strategy which envisions a flexible, digitized lending platform that utilizes the latest innovations.
Developing a robust digital strategy can seem overwhelming. At Capco, we believe the key to a digital strategy is to make it holistic. There are no digital ‘Holy Grails,’ magical one-off products, or vendors who will solve every pain point. Companies who win have a robust digital strategy that spans across lines of business, products, and processes.
To ensure a holistic approach, we have developed an easy-to-use framework of strategic questions. As a lender, especially one providing a suite of financial products to their customers, you should start by asking yourself (and your C-suite) the following:
- Customer-centricity: Do we know what our customers want?
- Competitive landscape: Who are our current competitors, and who do we want to compete against?
- Data strategy: How can we get a unified view of our customers leveraging existing data?
- Digital thumbprint: What does ‘digital’ mean for us and what else does it include besides technology solutions?
- Talent strategy: Is my organization ready?
- Technology maturity: How quickly can we become digital
Providing a digital mortgage experience to your customers will be necessary to survive and thrive. And selecting the right partner – one capable of navigating complex questions and developing a comprehensive, flexible approach – will empower you to compete and win. What’s your plan?