Whether it’s the independent local bookstore against the big-box corporate chain that just moved in down the block or a community bank competing with a global financial institution, it’s easy to assume the smaller entity is at a disadvantage. And while that may be true in some cases, the solution is easier than it seems. Tapping into technology in a strategic and focused way can help smaller financial institutions (FIs) compete within the mortgage business against larger national lenders and global fintechs to level the playing field.
From modern point-of-sale (POS) systems that streamline online applications to automation that accelerates the processes of origination and closing, technology can position smaller FIs to compete and thrive in the digital age. What follows are five factors for decision makers at small and mid-sized financial institutions to consider as part of their digital transformation efforts.
Customer-Centric Applications
In light of consumers’ growing demand for self-service options, online mortgage applications are more crucial than ever. But application interfaces that are slow, or that do not make it easy for customers to quickly find the information they need, can create friction and frustration. This may drive customers toward digital-focused lenders that offer a better user experience.
FIs should invest in a sophisticated POS interface that caters to customers with a wide variety of needs and preferences. Mortgage lending solutions that allow customers to explore rates, fees and products, complete an application in minutes, and secure approval instantly can help give smaller FIs the edge they need to compete against lending giants.
End-to-End Automation
Customers aren’t just looking for a quick and easy application process. In order to compete against larger FIs and online lenders, smaller institutions need to deliver rapid pre-approvals and faster closings. The key to accelerating the origination sequence is end-to-end automation, which can cut the time it takes to secure pre-approval down to 20 minutes and facilitate closing in as few as seven days. Borrowers can have a seamless digital experience, similar to what they’re used to via apps at the tip of their fingers. In addition to increasing efficiency, automating lending operations can also reduce manual errors throughout the origination process.
AI for Efficiency
AI has the potential to transform the way banks and financial institutions do business, including via considerable contributions to mortgage lending. For instance, advanced extraction technology can significantly reduce time spent on tasks like income verification and statement analysis. Financial institutions that leverage AI tools effectively can substantially increase their loan volumes. This means more customers securing loans in the same time span as before.
Scalability for Growth
When it comes to scalability, digital mortgage lending platforms are a great solution and equalizer for small FIs competing against larger entities. The right solutions can allow a small FI to expand its portfolio, as well as originate and close loans far beyond the borders of its existing retail footprint. Digital solutions can also streamline integrations with vendors, including Fannie Mae, Freddie Mac, and flood insurance providers, while supporting a wider variety of loan types, including HELOCs, construction loans, VA loans, and more. This allows lenders to handle surges without ballooning costs.
Enhanced Competitive Edge
Compared to large national or multinational businesses, small financial institutions often have the advantage of agility. These FIs can make faster decisions and adopt new tools or systems more quickly than competitors with highly complex operations to manage and a greater number of stakeholders to satisfy. Cutting-edge digital mortgage lending solutions can help smaller FIs amplify their competitive edge and outperform both local and national competitors. Seamless integrations with partner services, including credit reporting, appraisals, and secondary marketing providers, help position smaller FIs to not only compete alongside larger lenders but to win.
Competing in the mortgage lending space doesn’t always have to be about size or credibility. The key is to have the right tools in place and know how to leverage them effectively.
Mary Kay Theriault is director of product management, mortgage, at tech firm Finastra.