The more the industry gets accustomed to digital mortgages, the more areas it will need to expand into.
At the beginning of 2015, Kelly Adkisson, a managing director at Accenture Credit Services, explained that her company was seeing a clear change in customer demographics and needs, and lenders had to adapt.
"Millennials are expecting different services and capabilities from lenders,” she said. Accenture’s research suggests the emergence of a new high-value customer segment – “Generation D.” Generation D spans age groups and encompasses people who are deeply digital, integrating online and social media into the fabric of their lives.
Now that a year has gone by, Adkisson updated HousingWire on what the industry can expect for digital mortgages going forward.
HW: How have you seen digital mortgages take off this year?
Adkisson: After largely achieving compliance with TRID this year, lenders are pivoting to focus on customer centricity. 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.
Lenders are trying to understand what customer experience they want to drive at each point in the mortgage journey. Then they can determine which digital capabilities to invest in, including interactive, mobile, analytics, customer relationship management and e-closing. In most cases, some capabilities may need to be built internally, while others may involve partnering with a vendor.
HW: What were (or maybe still are) some of the biggest hesitations and problems keeping lenders from going digital?
Adkisson: Lenders need to increase the breadth of their digital footprint to provide a better customer experience during the home-buying process. But there are several hurdles to overcome.
- First, the regulatory environment over the past five years has consumed management time and investment dollars, compromising the ability to focus on innovation.
- Second, outdated legacy loan origination systems make it difficult to adapt to mobile, cloud, analytics and other digital capabilities.
- Third, lenders need to rethink how they implement digital strategies. With digital capabilities rapidly evolving, the traditional model — planning months or even years in advance — won’t suffice. There is greater push for rapid prototyping and faster time-to-market for customer-facing applications.
HW: What can we expect to happen next year now that digital has become a lot more common?
Adkisson: We are entering a period of declining volume in loan production and historically low delinquency volume, which is driving higher costs per loan. So lenders are faced with the declining economies of scale. Many of our clients will be focusing on continuous process re-engineering as well as next-generation capabilities such as robotic process automation.
Lower overall volumes will require lenders to compete more effectively for fewer customers. Lenders need to invest in analytical capabilities to drive high-quality leads, that is, consumers who are “in the market” or will be soon based on life event triggers. The analytics must also ensure alignment with product and credit guidelines.
Applying sophisticated analytics to leads should be coupled with personalized marketing campaigns to drive conversion of those leads to sales. The right analytical approach to leads and marketing will drive a higher return on investment for lenders’ marketing expenditures.
HW: Next year, more first-time homebuyers, especially Millennials, are expected to jump into the market. What tips would you give lenders about those buyers?
Adkisson: Banks that try to deal with Millennial customers in the same way they’ve served their parents and grandparents will not effectively capture this segment. Millennials are a completely new kind of banking customer. They are what we call “digital natives.” Accenture research shows that a far greater number of Millennials signed up for mobile banking apps last year than did other age groups. And they purchased a mortgage online more often than other age groups.
Our research shows that banks must do more to win the Millennial generation. Millennials are impatient. As a group, they switch from their primary bank at a pace nearly double the average of other age groups.
Lenders must understand that Millennials want to interact with them — from application to close — through online channels. For instance, they expect status updates about their loan applications through mobile, text messaging and other digital channels.
Beyond that, Millennials want their banks to be more than mere loan processors. They expect other services that reflect the fact that getting a mortgage is a life milestone, not just a financial transaction. For example, rather than just providing the home loan, lenders can educate Millennials on the obligations of homeownership, suggest Realtors who work in the area, and connect them with service providers to assist them with home-improvement projects once they move in.
HW: Are there any challenges or issues that could hinder or block the growth of first-time buyers next year?
Adkisson: Accenture research found that most consumers increasingly characterize their banking relationships as transactional. That’s bad news for lenders. Consumers buy low-margin products from their primary bank and shop around for high-margin products. Over half choose other sources for home mortgages.
To address this challenge, lenders must become more than mere utilities. They should continuously reorient their business around customers’ fluid home purchase needs, both mortgage and non-mortgage. According to our research, 27% of consumers say that receiving end-to-end customer service would motivate them to apply for a mortgage with their current bank. This is true even if their bank did not offer the most favorable mortgage rates.
HW: Is there anything else you would like to add?
Adkisson: Data validation is a technology topic that’s receiving a lot of attention among mortgage lenders. Historically the loan-fulfillment function has been bogged down with verifying applicants’ income, employment, credit history and other critical information. This is a time-consuming, labor-intensive process.
So lenders are looking closely at how they can better integrate with independent third-party verification services to validate customer data on an automated basis. This will alleviate the burden of having to verify borrowers’ data, give lenders greater confidence in the accuracy of the data, and relieve borrowers of the hassle of submitting documentation such as tax forms and pay stubs (sometimes repeatedly) to the lender. This is another example of digitization facilitating lender efficiency and improving customers’ experience.