BLOG VIEW: When lenders go to market in search of new technologies, they take with them a laundry list of requirements that include functionality, integrations and other capabilities. They’re looking for tools that check all the boxes, including the box labeled “innovative.”
Innovation is such an overused term in business that its definition has become somewhat fuzzy. At its core, to innovate means to create something better than what previously existed, to change the status quo in ways previously unthought of.
However, change for the sake of change has never paid high dividends, and sometimes can even be a backwards step.
But what if we’re defining innovation incorrectly? What if the definition of an innovative technology for mortgage lenders was more geared toward making lenders better at serving mortgage borrowers? Wouldn’t that increase the importance of getting that box checked?
In this article, we explore the next logical question: how do you know if your new loan origination system (LOS) is innovative in a way that truly matters?
A New Definition For Industry Innovation
If we want to arrive at a better definition of innovation for our industry, one that is connected to the success of the mortgage lender, we have to first identify what is required to ensure success.
In the case of mortgage lending, these requirements are very straightforward:
- Seamless digital connections to prospective mortgage borrowers provide the intuitive experience they prefer. Whether through existing point-of-sale technology that is connected via an application programming interface (API) or a tool built into the modern LOS, a seamless borrower experience must be enabled. It must be flexible enough to allow the lender to configure different borrower journeys, even across multiple channels, for maximum customer satisfaction. It should also treat the original interaction as a starting point to build a long-term relationship with the customer.
- Loans underwritten as quickly, easily and as accurately as possible. Using available technology to gather information that is already available in digital formats reduces friction and undue burdens on the borrower.
- Loan processing occurring quickly, with seamless connections to the other systems and services required to close the deal. By reducing manual intervention, lenders can avoid wasted time, duplication of effort, or the need to stare and compare the reports provided by third parties and the data in the system of record. Borrower inputs should be reduced wherever possible.
Of course, full regulatory compliance is a critical consideration, allowing for both an excellent borrower experience and an easy and intuitive process for the lender’s staff.
An innovative solution would be one that effectively addresses all of these requirements and be better than any other solution with regard to at least one of these requirements. In order to be considered a true innovation, a new offering should provide a full solution, not just a partial one.
The Key to True Innovation in the Mortgage Industry
The future of mortgage technology will be found in the public cloud.
While there are currently a number of solutions available to move mortgage lending out of the private data center and into the public cloud, there are some that offer significant advantages.
The cloud, in and of itself, does not meet any of the requirements specified to be deemed truly innovative. It is, however, the key to enabling a team of excellent mortgage technology professionals to meet these requirements in innovative ways. The reason for that is it provides a set of benefits that developers cannot access otherwise.
- The ability to silently and transparently scale based on user load, which simplifies support efforts. Lenders will not notice decreases in performance due to load, since the application will “expand and contract” with usage. This is critically important in an environment where loan volumes are changing.
- The ability to access infrastructure resources that are, for all practical purposes, limitless. The cloud provides access to “infinite” resources that can be provisioned on demand within seconds to minutes. Also, the infrastructure is maintained by the third party providing the cloud hosting, which has a financial incentive to do so.
- The ability to simplify technology deployment. The mortgage technology provider can create and maintain multiple environments on demand, while maintaining existing environments. During a release, if there is a need to roll back (which is a last resort), it will be possible to do so quickly and completely.
- The ability to compartmentalize mission-critical software into smaller, discrete pieces of functionality, where each part is specialized in its purpose. This type of Service-Oriented Architecture allows engineering to quickly triage, isolate, resolve and deploy fixes without impacting the entire application.
In addition, moving to the cloud provides additional benefits to lenders, including:
- Seamless, zero-downtime releases. In the case of a significant issue, lenders can be immediately redirected back to the previous version.
- Reduced downtime and minimal direct impact to users due to repairs or changes, which can be made by the engineering team immediately and transparently.
- System and data resiliency and redundancy, so should a system fail, there are real time backups of the data that can be recovered in seconds.
- Greater flexibility in access and usage of the application.
- Significant security benefits, virtually all of which are already built into the public cloud.
- Future-proofing of existing hardware, removing the need to make periodic investments to upgrade hardware or buy new servers.
Delivering a new offering from the cloud doesn’t automatically qualify it as an innovative offering under our new definition, but it’s a good start.
With the right technology partner, true innovation has never been easier to deliver than through the public cloud.
The right partner is critical and will allow the lender to tap into the immense power that’s built into today’s modern software platforms. There is always more functionality built into the systems than most users will access. The right partner will help make this functionality available to all appropriate users in the lender’s shop.
Seek out a technology partner whose innovative solutions have a proven track record. Some providers have failed to gain traction because they did not have a well-established solution, the ability to scale or a solid track record of sustaining their business model.
Ultimately, there can only be one true measure of whether or not a new technology is actually innovative. Only the lender can say whether it checks all of the necessary boxes on its technology shopping list, meets all of its needs and performs a function (or many functions) better than older tools.
The good news is that lenders are more likely to find innovative solutions than ever before. When they do, they will find that meeting their requirements allows them to better meet the needs of their borrowers, which will result in more referral business. In the coming purchase money market, that will be a change that is likely to pay high dividends.
Richard L. Novak is vice president, general manager, real estate lending, digital lending and origination for Fiserv.