Digitally de-risking the lending proposition

By Mark Blackwell, Lending & Surveying Services Director, eTech Solutions 

Mortgage Introducer October 2015

Digital technologies have massively impacted our working lives.  Mobile, social media, cloud and big data technologies have ushered in more flexible working practise for employees, more convenient access for customers and greater agility for the deployment of new services.

The business of being a citizen in 21^st century Britain has quite simply been revolutionized beyond recognition.   It’s simply become hard to think of one service we regularly rely on as consumers that has not become multi-channel.

Businesses that do not directly involve consumers now understand that the same technologies can enable them to take control of the risks and benefits in their own value chains.

Property risk management in many lenders and panel managers is now engaged with the idea of redrawing the process of valuations with consequences that will impact sales and credit functions as the way things are currently done changes.

Technologies in the lending and surveying space now offer clients the opportunity to create greater oversight of processes and third parties, through robust data sharing and better integration of third party suppliers and data providers.

The individual parts of the mortgage value chain can protect themselves like never before – lessening fraud, reducing operational risk in efficiency, and improving understanding of property credit risk.

This is causing businesses to rethink their operating models in ways that will impact entire business operations.   Sales, operations and finance are becoming more entwined than ever before and require a far less silo-based approach that still permeates the cultural thinking of many of financial services companies.   Most of the advances to date in financial services have been in distribution as a result of the consumer market’s demand for more general digital delivery or in reaction to regulatory scrutiny over less than ideal sales processes of the past.

However, the standardisation of many sales processes in mortgage lending now means that it is only by re-imagining property and operational risk that companies can realise real competitive advantage.  Relying on price and criteria alone is not a sustainable strategy for the future.

Unsurprisingly in financial services, given the impact of over a decade of regulation and where more established firms have a heavy reliance on legacy IT systems, the scale of this task has caused companies previously to hesitate to embrace this opportunity.

But doing nothing has consequences.  We have seen in retail insurance how comparison sites have ripped apart the old guard of insurance companies – all of whom are now remodelling their businesses.  Those that fail to react quickly enough to the digital disruption risk being phased out of the market by newer digital start-ups that are more agile and responsive to customer demands.  Digital incompetence has led many organisations to lose market position or cease to exist.   The death may be by a thousand cuts but the result is the same.

This is not an agenda for business re-engineering as we used to know it.  It is no longer a sticking plaster for bad processes, or tactical money saving initiatives, but a very real opportunity to enable seamless interaction between employees, suppliers and customers.

The 1990s saw many companies imagine that modernisation had a project end date, rather than being a cultural way of thinking.  Today, businesses are coming to terms with the technology age reality that progress is a perpetual work in progress.  Without doubt this integration of business practices raises many challenges and in lending it is not often possible to migrate all of the organisation’s existing applications due to technical, legal or business constraints.  Nevertheless, it will be critical to integrate the legacy systems and old delivery channels with the newly digitalised services in order to create an agile environment that supports lending more efficiently than it does now.

The complexities and potential pitfalls involved in becoming this type of business are leading many to look to bring in technology partners to gain access to application and digital design expertise that may not exist internally.   However, bearing in mind the speed of change and the need for technology to deliver competitive advantage, it is essential that businesses demand flexibility from their partners.   With a modernised landscape at the heart of their operating environment, business will be in a far stronger position to embark on the road to technology reform.   The new IT environment will enable firms to introduce new services incrementally, phasing out legacy systems gradually to minimise disruption and ensure they are seamlessly integrated with the broader business structure and market.

With so much standardisation in other parts of the value chain, de-risking operations has become the key battleground in developing real competitive advantage that will benefit lenders through risk management and distributors through more efficient service.

Read the full publication here