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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2016

The Digital Finish Line Is Behind Us

Mortgage companies should look to the auto-finance industry, which went digital years ago

The Digital Finish Line Is Behind Us

One of the top-five imperatives for mortgage-industry executives is accelerating their digital transformation. The demand for transparency and client self-service, plus the need for compliance management, means mortgage companies must reinvent the customer experience for mortgage origination.

To help accelerate this process, the mortgage industry might want to take a look in the rearview mirror at the positive strides the auto industry has made to improve its customer experience through extensive use of digital channels.

The good news is that the mortgage industry is finally making some positive strides toward bringing the loan-origination process more fully into the digital age. The J.D. Power 2015 U.S. Primary Mortgage Origination Satisfaction Study reports higher satisfaction among customers who use digital channels for activities related to mortgage applications, such as completing applications and submitting documents.

The bad news, however, is that even though the 2016 World Retail Banking report also concludes that the mortgage-customer experience is improving as originators make baby steps toward improving digital connectivity with customers and sales channels, the report also says these improvements are not increasing profitability.

All the statistics say that if you improve the customer experience, you will increase revenue. So why isn’t the needle moving for mortgage loan originators? The industry is simply not going far enough or fast enough to digitize the entire customer experience. Mortgage companies need a more comprehensive approach that connects loan originators with consumers — from the loan application to the closing. Originators still rely on phone calls, U.S. and overnight mail, and paper processes to get their clients to the closing.

Parallels with auto industry

Increasing closing rates is something the auto-finance industry learned to do long ago. There are a number of parallels between mortgage lenders and the automotive industry.

  • Having distributed sales channels, with the mortgage industry relying on loan originators and brokers while automotive companies rely on finance companies and dealership staff;
  • Selling big-ticket items that require extensive paperwork consumers must wade through to complete their purchase;
  • Transforming from a product-focused sales process to a customer-centric one;
  • Adhering to federal and state regulations and rules; and
  • Serving challenging consumers who are busy, time-starved and looking for convenience, expedience and relevancy.

Despite facing a similarly fractured sales process that makes secure integration a big challenge — especially when dealing with third-party systems — auto financers have been early adopters of digital channels. They understand their customers expect to use the web to conduct business and also expect an easy-to-use, fast experience that provides a “let me do it myself” option.

In contrast to mortgage companies, auto financers have taken the route of customer-centric technology solutions that integrate with existing systems, third-party applications and customer data.

Customer-centric strategies

Many mortgage organizations, on the other hand, are racing to build out a big-data strategy instead of focusing on customer pain points — the auto-finance industry approach. The right strategy is to start with a customer-journey map. This will identify what data is most important to your customers and deepen your understanding of them. The map is a visual representation of customers’ relationships with their lenders over time and across touch points, channels and devices.

A customer-journey map is similar to walking the distance of the transaction in your customer’s shoes, from the first hello and application to the contractual end of the financial relationship. The goal is simple: Learn about your customers.

Building a customer-journey map furthers your understanding of the context within which customers interact with your company when applying for a mortgage. It can help clearly identify opportunities to reduce gaps between what your customers want and what they receive — across channels, devices and departments. When done correctly, the process includes all key parties that touch the customer throughout the entire process. It is a great way to transform a disjointed mortgage process into a unified experience.

Building your strategy from a customer-centric point of view increases the effectiveness of your origination process, which should translate to more satisfied customers. The J.D. Power study showed that seven out of 10 highly satisfied mortgage customers say they “definitely will” recommend their lender, and three out of four definitely will consider using the same lender for their next home purchase or refinance. In addition to increasing satisfaction, a customer-centric strategy also drives down costs and is faster to launch than a big-data strategy. This increase in satisfaction, then, goes hand-in-hand with lower costs, which translates to higher revenue.

Classifying customer data

Very few mortgage companies take the step of classifying customer data. They find it easier to simply throw a net around all data and require full security on everything. This misstep is one of the reasons that financial-services companies are stifled by fear. As a result, they have missed a decade of technological progress that has proven to increase customer satisfaction, loyalty and revenue.

Categorizing all of your data at one time is an overwhelming process. This takes time that most mortgage companies do not have to waste. For example, interest rates and a growing economy were impacted by the recent Brexit vote in the United Kingdom to withdraw from the European Union. As long-term rates hit new lows after the referendum, many companies scrambled to capitalize on the mini-refinance boom that resulted, carving time out of other business priorities to pursue this new business.

Day-to-day business pursuits are further complicated by the additional compliance issues all lenders and mortgage companies must deal with today. With the limited and stretched resources many mortgage companies have at their disposal, isn’t it better to take a page from auto-finance lenders? Determining your data needs using a customer-journey map based on specific business objectives will reduce the amount of time it will take to design and launch your digital product.

Self-service solutions

For 10 years, auto-finance companies have used personal microsites as a marketing tactic to connect customers with dealers. Consumers like personal microsites because they provide the transparency, personalization, communication and relevant updates they seek.

Mortgage companies typically reserve personal microsites for account management only after the mortgage is closed — and only if they service the loan. Online accounts are multipurpose, however. They can be used for far more than making payments and providing account balances.

For mortgage originators, specifically, personal microsites can streamline the path to closing. Customers are served personal data and content that speaks to them as individuals. Although the microsite contains product and service information, the content is customer-centric. The goal is to engage the customer, create a relationship and close the loan.

The Tesla car-buying experience serves as a great example. After a test drive, a customer receives an e-mail with a link to MyTesla.com, a self-service account that introduces the customer to a sales adviser. The MyTesla.com site provides a way for consumers to learn more about the product and evaluate the various options. Consumers also can save information and apply for a loan. In the case of mortgage companies, the initial e-mail could connect consumers to mortgage loan originators.

Studies show that most consumers prefer to use a company’s website to get answers to their questions over using a call center. This is not because consumers hate mortgage representatives. There always will be a need for customers to talk to someone knowledgeable about a product or the status of their loan. Most consumers love the time savings and low sales pressure of self-service options. It is about convenience.

Consumers are less likely to visit competitor sites if they can find everything they need to apply for and close their mortgage loan with just a click or two on your website. Incorporating an account-aggregation or account-linking service with the self-service account makes it easy for consumers to apply. Account-linking services provide ready access to the majority of documentation applicants need to upload during the mortgage-origination process.

• • •

Digital transformation is not just about automating the back end and sales processes; it is about creating a personal buying experience. The goal is to position mortgage originators as trusted advisers who can help consumers navigate the entire purchase process.

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