Here's how retail lenders can compete in this digital world

Is digital the end of retail lending branches?


A side effect of digital mortgages as they gain prominence is the slow extinction of brick-and-mortar lending branches. But before lenders are left in a lurch, Kelly Adkisson, a managing director at Accenture Credit Services, weighed in options lenders still have to survive. 

Over this past year, Adkisson said, The mortgage industry has stepped up efforts, as it must, to adopt digital capabilities to deliver a better customer experience. Greatly influenced by digital innovation that powers other aspects of their lives (think Uber and Amazon), borrowers, in turn, are rewarding lenders who offer convenient, simple, speedy, on-demand and personalized service.”

This leaves brick-and-mortar branches in a tough position.

“Borrowers increasingly want to interact with mortgage lenders—from application to close—through digital channels. At the same time, brick-and-mortar branches are losing relevancy,” said Adkisson. 

According to Accenture research, Adkisson said, “The number of borrowers who applied for a mortgage through the branch decreased by 25% since 2012. More than half of the top ten mortgage lenders are non-traditional banking institutions, reinforcing the point that lenders do not need brick-and-mortar locations to successfully originate mortgages.”

Back in December 2014, Ditech made a bold move and announced a broad push to open more retail branches despite reports already out at the time that digital banking challenged retail bank branches.

Ditech explained at that time that it still found value in brick-and-mortar buildings, since some people still valued the extra-high touch of a mortgage lender relationship that knows their local area very well.

Flash forward a little more than one year and Ditech is recanting its stance on the matter. As of Jan. 8, Ditech exited its distributed retail lending channel due to changes in the market.

"Throughout 2015 we moderated our investment in the distributed retail channel given current and expected market conditions, as well as recent regulatory considerations, and subsequently made the decision to exit the channel,” said Denmar Dixon, Walter Investment's vice chairman, CEO and president.

Not too long after Ditech’s announcement, BankUnited similarly announced it would no longer offer retail residential mortgage loans to consumers since they weren’t generating enough business.

But this doesn't mean the only option for retail banks is to admit defeat and close down. Adkisson added, “Many prospective borrowers still value branches. Banks need to focus on creating a seamless experience between physical and digital channels.”

She explained that borrowers should be able to start the process in a branch or call center and finish online or via a mobile device, and vice-versa.

“Banks should also equip their branches with digital capabilities such as having a real estate expert available virtually to talk with prospective borrowers via video chat,” she said.

To help combat this trend, Adkisson said they are encouraging lenders to invest more heavily in digital capabilities that equip prospective borrowers with tools to educate themselves on mortgage products and processes, and in technology that removes paper from the process.

“As the industry moves away from brick-and-mortar, lenders should focus on offering advice to borrowers throughout the process, thereby easing the transition from high touch to digitally enabled,” she said. 


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