A failure to grasp technological innovation could cost lenders dear, warns Paul Hunt, managing director of Phoebus Software
When it comes to integrating technology, the mortgage lending industry has never been considered a trailblazer. Lenders tend, unlike the famous tech firms of silicon valley, to employ people who wear suits. They are businesses that scrutinize carefully the integration of new practices because they cannot afford to make mistakes. Unlike Facebook, when lenders ‘move fast and break things’, financial crises ensue.
Given the seriousness of what happens when things go wrong, it’s hard to blame lenders for taking a cautious approach to change. But the idea that change is inherently dangerous is one that could ultimately prove very costly to any businesses that fail to engage with new technology. If the career of Mark Zuckerberg teaches us anything, it’s that new ideas are not solely the preserve of Generation Y. Technology’s potential for change is by no means limited to the frivolous and youthful. No matter who you are, the ever-increasing connectedness of the world is a very serious matter indeed.
Too frequently companies are guilty of creating a Sunday-Monday dichotomy wherein employees spend their weekends hyper connected through smartphones and tablets accessing social media, gaming or streaming films, but when they arrive at work on Monday morning, they are thrown back into the dark ages. Too often, according to Professor Dutta, companies assume that technology is something appropriate only for the young at leisure. Companies around the world are losing productivity because they aren’t prepared to apply the surfeit of new technologies to their business practices.
Of course, it’s not just a case of importing new methodologies and technologies wholesale without proper consideration. Companies investing in technology for reasons of fashion are just at just as great a risk of becoming uncompetitive as those who refuse to break down antediluvian practices. But through consultation with employees, customers and the assistance of those with experience in modernising business practices through technology, major improvements can be made. The key is to integrate new technology with a change in mindset within an organisation. This way, technology can be used to complement, rather than replace effective working practices.
Nowhere is this more relevant than in the mortgage industry. Of course lenders and servicers must tread with the utmost caution when altering their working practices and changing the technology they use. But while it may to many seem unlikely, the mortgage industry’s mindset is changing and technology is at the heart of the positive changes being made.
As the post-recession regulatory position is thrashed out, it’s clear the industry is moving toward a greater focus on individual borrowers. Lenders and servicers are working hard to find ways to assess their clients’ individual needs, strengths and vulnerabilities. This allows servicers to identify risks further in advance and try to find a way of preventing arrears building up using alternative payment structures. It’s an essential innovation that will allow lenders and servicers to improve their services, comply with TCF and improve the quality of their mortgage books. But what many have failed to appreciate is that these vital innovations are being driven by a growing use of technology. Growing use of technology by mortgage lenders means a faster and more efficient flow of information within and between businesses as well as between lenders and borrowers.
Being nervous about technology isn’t unhealthy. It’s vital companies do everything they can to ensure they make the right changes. But failure to see the corporate benefits of what might appear to be purely social technologies could prove the biggest and most costly bear trap for the lending and servicing industries. Technology’s capacity to improve services and reduce costs means in the years to come it will differentiate the business successes from the also-rans.