Making the Digital Mortgage a Reality. Carter Kirks PwC

Transcription

1 Making the Digital Mortgage a Reality Carter Kirks PwC

2 The current state of affairs in mortgage lending While mortgage lenders were trying to recover from the Global Financial Crisis, customers moved on without them and new competitors raised the bar. Now the race is on to make up ground, a challenge made even more difficult given the time pressure from rising interest rates. New competitors entered the market, ready to serve customer demands for more dynamic experiences enabled by cost-efficient digital platforms While mortgage lenders were focusing on maintaining competitive parity post-2008, a momentous shift occurred. Consumers expectations have been dramatically altered by their experiences with digital leaders across industries. PwC Making the digital mortgage a reality 2

3 The bar has been raised Experienced leaders seek the light of inspiration from across other industries. Consumers are interacting with companies digitally in every facet of their day-to-day lives. Think how easy it is to use your mobile device to: Book a flight Hail a ride Buy a cup of coffee Order a pizza Why should your customers expect anything less from the biggest purchase most will ever make? Consumers will benchmark your digital experience against every website they browse. Against every app in their phone. Against every social media channel they spend time on. Not just against other mortgage lenders. PwC Making the digital mortgage a reality 3

4 Digital tools have become ubiquitous and consumers have fully embraced them Percent of recent purchase customers using online tools* Online application/ document submission Online portal for loan status Online mortgage/affordability tools and calculators 83% Online educational tools about the mortgage 76% Online scheduling/ communication tools 71% Online saving/planning tools 71% 72% 69% Used Did not use PwC Making the digital mortgage a reality 4

5 Borrowers interest in using lender tools Choosing between loan types Comparing prices across multiple lenders Estimating the value of your home or homes you want to buy Understanding local market real estate trends Deciding when it's the right time to buy Finding a home Finding discounts/savings for the move Budgeting and reducing monthly expenses Finding a real estate agent Planning for and tracking home maintenance Saving and planning for your down payment Helping plan for your move Finding movers/professional help Unlikely Moderately 0% Likely 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PwC Making the digital mortgage a reality 5

6 Borrower demand for digital lending is no longer a question of Whether. It s now a question of When, Why, and How. As common digital tools are becoming commoditized, we are seeing leading industry players continue to transform their experience by incorporating innovative capabilities. Common digital tools Scheduling/communication tools Mortgage/affordability tools & calculators Loan statusportal Saving/planningtools Educational tools(about mortgage process) Application/document submission PwC Making the digital mortgage a reality A look ahead Increased automation, reducing manual data entry through auto-population Voice interfaces, led by the rise of smartspeakers and virtual assistants Hyper-personalized advice and pricing, driven by artificial intelligence and machine learning A more engaging customer experience, drivenby design thinking andgamification Increasing choice for consumers, and abilityto 5 control how they interact with tools (e.g., guided or self-service) 6 Proactive advice and recommendations Before borrowers even realize they needhelp What it means: We believe consumer expectations for digital tools will soon look very different. As lenders adapt to the digital paradigm shift, several trends will dramatically reshape the tools which mortgage lenders offer. 6

7 Lo w Support High Consider the customers you want to serve They are using digital tools for different purposes they are likely to have very different opinions about the quality and usefulness of each tool. Consumers are divided across two primary dimensions in terms of the experience they desire* Support Engagement Level of Education and Information Desired Some borrowers want to know every detail of every step in the process, while others want a Wizard of Oz mortgage, with everything handled behind the curtains. Level of Human Touch Desired Some consumers want to guide themselves, while others want an expert advisor helping them every step of the way Video chat, co-browsing, and even automated chatbots are all digital capabilities that enable a lender to offer a High Support, High Engagement experience. Level of Support x Level of Engagement Self-Service Streamlined Guided On Demand Lo w Engagement High PwC Making the digital mortgage a reality 7

8 Consumer views of digital mortgage are changing Views have shifted away from digital as a binary alternative to personal interaction, the lines between channels are blurring, and the ways customers want to interact with lenders are evolving. Average number of interactions by channel per customer, assuming 45 day close* Website 8.2 Text 3.4 Phone call Website (Laptop or PC) In-Person Mail/Fax documents 3.3 Mobile app Online chat What it means: Customers are mixing digital and personal interactions, and using digital tools in different ways at different times often simultaneously. Meeting expectations now means enabling customers to choose their own adventure. *Calculated based on average frequency of contact as reported by recent purchase customers. 45 day close used as assumption based on typical range found in consumer responses and industrydata. PwC Making the digital mortgage a reality 8

9 Relationships continue to have a very strong influence Digital tools are not replacing loan officers they are supplementing them and making them more efficient and effective. Borrowers view home buying as a single transaction and expect all stakeholders to work together seamlessly and effectively Incorporate loan officer and real estate agents needs into the digital platform Borrowers are looking to lenders for advice establish stronger connections Offer full-service suite of tools Help your customer understand real estate trends Link their home-buying investment to their overall financial health PwC Making the digital mortgage a reality 9

10 Guidance and clarity add value Although digital tools are now widely being adopted, there is significant room for improvement, particularly in guiding the customer through a still long and confusing mortgage process. Loanoffer Speed/total time to close Overall experience Interest rate/price Ease/level ofeffort Borrower satisfaction with aspects of mortgage process (purchase) 46% 55% 54% 54% 59% Despite the tools available to customers, 20-25% of customers surveyed are still not satisfied with the ease and/or simplicity of the overall mortgageprocess. What it means: It isn t enough just to make digital tools available to customers; continued investment in the quality, relevance, and utility of digital tools is essential. Investments haven t changed views of the mortgage processas many expected. Simplicity/clarity 46% 0% 20% 40% 60% 80% 100% Extremely satisfied PwC Making the digital mortgage a reality 10

11 What is a digital mortgage?.and what do you need to consider? PwC Making the digital mortgage a reality 11

12 What does a digital mortgage process look like? 1 eapplication 3 eprocessing and underwriting eclosing 5 Doc prep Pre-funding Servicing and Funding investors 7 9 Portal emortgage technology hub 10 LOS with integrated workflow Mers eregistry and edelivery 2 edisclosure 4 Third-party Services everification Apprisal Title Many lenders are missing an integrated end-to-end strategy for efficient paperless processes. 6 esignatures & erecording Buyer Seller Notary PwC Making the digital mortgage a reality 12

13 Even today s leading lenders still have a lot of room to grow Despite the increased focus on meeting customer experience expectations, the majority of lenders are still relatively low on the digital maturity curve when compared to the complete transformation necessary to reach the blend of differentiated customer experience and process efficiencies offered by the mortgage provider of the future. Thetarget The Muddled Majority Offering limited online or interactive capabilities, the majority are investing in digitization of existing processes rather than transforming the customer or employee experience. Emerging Experience Providers Those viewed as being on the leading edge of today s borrowing experience are taking advantage of limited legacy infrastructure to build unique, often digital experiences on top of core platforms - but are not driving sustainable differentiation. The Mortgage Experience of the Future Future leaders will not just optimize the transactional process of applying for a mortgage and managing the account - they will design an overall experience aligned to consumers lifestyles. By predicting where customers will want advice and what information they ll need to make informed decisions, lenders can provide the support that borrowers are looking for from a trusted advisor - with digital and human components working together in concert. To achieve this, lenders will need to leverage a combination of existing and emerging technologies to provide anytime, anywhere support across every channel - and will also need to improve the underlying technology capabilities to provide that support in real time and through an engaging experience that seamlessly spans the entire lifecycle. PwC Making the digital mortgage a reality 13

14 Digital mortgage maturity Where are you in your digital mortgage journey? Illustrative digital mortgage maturity model High Evolving Development of full suite of online capabilities, including ability to submit full application online Limited post-application tools, including document upload Initial investment in user experience, including borrower support and educational tools Low Limited Initial development of online tools, with focus on product information and initial contact Significant user experience limitations Optimizing Robust suite of online and mobile capabilities, including full borrower portal with ability to obtain rates up-front, receive status notifications, and complete full origination process online User-centric focus on enhancing experience, including the online application process Integration with verification tools and other vendors to streamline application Organizational commitment/effort Leading Full online experience aligned to entire range of potential customer interactions and touchpoints Development of additional borrower support and tools for end-to-end purchase process, including home search Robust support for entire purchase ecosystem including functionality for loan officers and real estate agents Integrated omni-channel customer experience Mobile application support High PwC Making the digital mortgage a reality 14

15 Digitization leads to customer satisfaction An analysis of customers use of six different digital tools showed that use of these tools is highly correlated with increased customer satisfaction - All six had a statistically significant relationship. Percent of recent and prospective purchase borrowers promoting online tools Online education tools onthe mortgage process Online scheduling/ communication tools Online mortgage/affordability tools and calculators After analyzing the digital tools offered by a subset of your lender websites, the following results were found: Tools/Function Farm Credit Lenders Top 10 Lenders Online Chat <5% 20% 64% 63% Online portal for loan status Online saving/planning tools Online application/document submission 62% Affordability Tools/Calculators Guiding info loan best suited 5% 40% 20% 40% Educational materials 20% 100% 61% Promoter 60% Passive/Not apromoter 58% Online loan application 35% 100% PwC Making the digital mortgage a reality 15

16 Digital Lending Leadership Requires a Strategic Approach Choosing evolutionary and revolutionary improvements mean applying this framework to the next phase of your digital experience combined with investments in emerging technologies. Before you design your digital lending transformation, you must define your organizational objectives: Customer Experience How do you want to interact with customers? Operational Efficiency How do you want your business to function? Digital offerings UI/UX StreamlinedProcesses DigitalInterfaces After defining your organization s objectives, these foundational elements should guide your decisions around specific solutions to ensure your digital offerings provide the rightroi. Capabilities User-Centric Design Approach Data-Driven Decision Making Flexible Infrastructure Effective Development Approach Organizational Agility Organizational objectives Customer Experience OperationalEfficiency PwC Making the digital mortgage a reality 16

17 Low Support High Next steps for lenders Rethinking your end-to-end customer interaction model is critical to enabling customers to choose their own adventure. Focus area #1: Support and Engagement Develop unique engagement models foryour different borrower segments. Borrower interaction matrix 64% Focus area #2: Human touch Choose tools that enable, not replace your human capital. 64% of interactions will include a digital tool, and more than half are human-supported. Self-service Guided Streamlined On demand Low Engagement High PwC Making the digital mortgage a reality 17

18 Next steps for lenders Rethinking your end-to-end customer interaction model is critical to enabling customers to choose their own adventure. Focus area #3: Value Engage your customers before and after the transaction. Focus area #4: Link Investments to Objectives Link your digital investments to the goals you want to optimize. Comparing prices across multiple lenders No 24% Yes 75% Based on our research, some of the most pressing issues to addressare: Estimating home values Finding discounts/savings for themove 26% 34% 73% 65% Reducing costs (i.e., leverage RPA) Providing improved educational tools Finding a home 37% 62% Planning for andtracking home maintenance 44% 56% Saving and planningfor down payment Finding a real estate agent PwC Making the digital mortgage a reality 44% 47% 55% 52% Improving efficiency (i.e., reduce manual data entry) Improving early stage borrower support (i.e., tailor marketing) 18

19 Roadmap for implementation Do you have a plan? The best way to implement a digital mortgage process is with a consistent framework that allows lenders to adapt the program based on their existing operations and systems. Following are three steps in that framework to guide you through the process. Prioritize Operations and Customer Experience Since lenders are likely to find benefits from most if not all components, the question becomes "when and "how rather than"which. There is no one-size-fits-all approach. Instead, choose the enhancements that strategically bring the largest impacts to cost and risk on an operational front, and revenue on the customer experience side while keeping an eye on timelines and sophistication. Assess LOS and system capability vs. desired functionality Reviewing LOS capabilities will help determine if the current system can be enhanced to support new processes. If the system does not have the capability to support desired functionality or security, bolt-on auxiliary systems or consider a new LOS. It will also be important to optimize third party integrations and the interfaces needed to accommodate document and data transfer. Develop a long term roadmap Due to the interconnectedness of digital mortgage components, a roadmap must be designed before beginning any single aspect of implementation. Avoid fragmented approaches, and understand the plan might occur over several years. A sample short term strategy is shown on the following slide. PwC Making the digital mortgage a reality 19

20 Automation is not a Point In Time exercise 1 Strategy 2 Identify& Scope 6 Optimise Continuous improvement 3 Impact Run 5 Develop 4 PwC Making the digital mortgage a reality 20

21 What technology is required? Many of the same underlying technologies can enable multiple opportunities across the end-to-end borrower lifecycle: Processing/ Customer Borrower Acquisition Application Underwriting Closing/Funding Onboarding Performing Servicing Default Servicing Digital Marketing: Customer targeting and segmentation Advertising optimization Cross-channel attribution Personalized offers Originations: Automated processes: verification, underwriting, fulfilment, etc. Digital customer interface Education and support Servicing: Self-service and more efficient account management Insight into consumer payment behavior Alerts and notifications Automation: Robotic Process Automation, OCR, Business Rules Engines, 3 rd Party Integrations (e.g., Asset Verification) Data and Analytics: Household-Level Analysis, Alternative Data Sources, Master Data Management, Machine Learning Risk tools: Automated Hard Stops, Automated Testing, Systematic Controls Customer interaction support: Chatbots, Omni-Channel Messaging Optimization, Content Engines PwC Making the digital mortgage a reality 21

22 How to deliver a leading digital experience Build, buy, or Partner? One size doesn t fit all For lenders, the loan lifecycle may include a blend of in-house and vendor solutions. You don t have to and don t want to have a proprietary solution for everything. For each component, the solution may vary and a lender could have a robust suite of specialized vendors to provide its digital offerings. Even those lenders who build the primary solution in-house will likely use vendors for specific areas such as fraud prevention and cloud storage. Key considerations Strategic positioning Do you want to be a leader developing new capabilities, or a fast follower keeping pace with competitors? Budget How much are you willing to spend to transform digital consumer lending? Customer experience How do you want to interact with your customers, and what capabilities will support that experience? If being better at something isn t going to differentiate you from your competitors, there is no sense in building your own solution. PwC Making the digital mortgage a reality 22

23 Is it time to replace your loan origination system? Lenders will achieve cost savings, enhanced efficiencies, and customer satisfaction by having a robust and flexible system to handle changing origination needs and comply with regulatorychanges Apply Now Originations Seamless integration to third-party providers with two-way data exchange Robust compliance engines Success-based pricing no need to pay for fallout Flexibility throughhighly configurable systems Electronic document management Customer Experience Borrower portal for those that prefer conducting business online Ability to track status and outstanding conditions throughout theprocess Upload and download documents electronically edisclosures and esign capabilities Reduced cycle time, leading to faster closings Operations/Analytics Comprehensive & timely data supportfor financial or business analytics Increased efficiency and reduced errors with automated processes Reduced regulatory risk by integrating regulatory requirements in mortgage platform If your Loan Origination System is not keeping pace with the industry, it is time to explore your options: Identify High Level Business Requirements Engage Potential Vendors - RFI Score Vendors Narrow List Complete RFP Process Select New Vendor PwC Making the digital mortgage a reality 23

24 Additional resources Consumer Finance Publications: Consumer Lending Understanding today s empowered borrower Getting a bang for your digital buck: how to deliver a positive ROI on your investmentsin digital lending Digital mortgage 2.0 A paradigm shift in customer experience Robotics and Digital Labor in Mortgage Lending PwC Making the digital mortgage a reality 24

25 Carter Kirks David Rice