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Lending, Open Banking

How Digital Adoption Helps Lenders Weather COVID-19 (And Other Dynamic Challenges)

Some challenges are predictable. With more consumers growing accustomed to digital solutions in all industries, it’s not surprising that they would expect the same in lending, which could present a challenge for lenders lagging in digital adoption. Other challenges, however, sneak out of the shadows and force industries to adapt overnight, or fall drastically behind.

COVID-19 presented such a sudden, dynamic challenge to the lending industry. McKinsey & Company pointed out that “the conventional sources of data typically used in credit-risk assessments became obsolete overnight.” Lenders had to pivot to originating and processing loans remotely, requiring most of them to completely change their workflow without sacrificing the quality of their service. The work-from-home pivot also made manual verification infeasible and increased demand for digital verification and financial data access.

Many factors affect a lender’s ability to weather dynamic challenges. One solution continues to consistently produce positive results in today’s COVID era — digital adoption. Here’s how digital adoption gives lenders the efficiency and agility necessary to weather the pandemic and future dynamic challenges.

Today’s Dynamic Challenges

The pandemic presented a surprise test for lenders. Did they have the agility to quickly adapt to unprecedented changes in both the industry and in the life of customers? In a recent webinar with Brad Lando, Senior Vice President of Strategic Development at Guaranteed Rate, we discussed how COVID had affected his organization. “We sent about 6,000 employees home almost overnight amid record-breaking volume,” Brad said. “Everybody had to learn how to originate, process, and underwrite at home, with kids and dogs in the background.”

It’s important to note that the pandemic didn’t create the need for digital solutions that can be serviced and accessed from home. As Chris Backe, Consumer Engagement Specialist at Ellie Mae, noted in a recent webinar, “The whole digital mortgage movement is not really being imposed on lenders by technologists…it’s a movement from the borrower.” Fannie Mae backs up Chris’s comment with research stating that two-thirds of borrowers would be interested in a fully digital mortgage. Consumers want digital solutions that fit in their increasingly digital lifestyles. COVID simply accelerated digital solutions from a preference to a need.

The COVID-19 pandemic will pass, though its effects will linger. And while the pandemic dominates our news cycles and many a business meeting, there are other challenges that will come. Part of what made COVID-19 so impactful was its sudden and overwhelming changes, like a tsunami with no warning. Everything changed overnight, and a pandemic isn’t the only event that can create such a challenge. The best way to prepare for and weather a dynamic challenge with minimal setbacks is with the agility and efficiency offered by digital solutions.

What Does Digital Adoption Entail?

Digital adoption involves augmenting a traditional manual lending process with one or more digital solutions. And while you can of course dip your toe in the water by integrating a single solution at a time, the most successful digital adoptions are those that reshape the process from the ground up or start from scratch and build fully digitally native processes. 

The best digital adoptions also involve much more than simply asking borrowers to submit documents in an online portal. Instead of submitting two months of bank statements, for example, the consumer can simply permission access to their bank data and the lender can receive the information necessary to make their risk assessment.

McKinsey & Company put it best: “It’s not just about digitizing. Companies must also reimagine customer journeys to reduce friction, accelerate the shift to digital channels, and provide for new safety requirements.” Digital adoption isn’t just about integrating different solutions, it’s about rethinking how a lender interacts with and serves the consumer. A successful digital adoption will entail:

  1. Creating a holistic digital strategy from the top of the organization and on down. Leaders must take the reins on implementing digital strategy to ensure successful adoption in every level of the organization.
  2. Educating teams and getting everyone on-board. Show teams how they will uniquely benefit from digital adoption and make sure they understand how their work will change with this new strategy.
  3. Using accurate, reliable, secure technology. Digital lending only provides the highest ROI when it uses the best, most accurate data and secure connections.
  4. Being transparent and educational with consumers. This adoption is about them! Teach consumers how your workflow will change and how digital adoption will benefit from these changes.
  5. Being patient. Reshaping your workflow is a monumental change. But patience can yield unprecedented rewards.

Finicity understands that adopting digital verifications and completely changing a workflow can be intimidating, so we offer easy integration and best practices training, as well as account support, to ensure adoption goes smoothly. A successful adoption will then position a lender to weather current and future challenges.

Digital Adoption and Weathering Dynamic Challenges

Digital adoption enables a lender to be more agile when dynamic challenges come. In our discussion with Brad Lando, he told us that, thanks to digital validation tools, Guaranteed Rate has “barely skipped a beat.” In a time when hundreds of thousands of businesses are having to close their doors, digital adoption has enabled lenders like Guaranteed Rate to continue serving customers and “quickly adapt to the new normal.”

Guaranteed Rate isn’t the only organization whose agility has helped them weather the COVID-19 pandemic. McKinsey reported that “Companies that have led the way in adopting flatter, fully agile organizational models have shown substantial improvements in both execution pace and productivity. This has held true during the crisis, as we see a direct correlation between pre-crisis agile maturity and the time it has taken companies to launch a first crisis-related product or service.”

The agility of digital adoption comes primarily from its consumer-centric streamlined solutions and the resulting efficiency. For loan personnel, digital adoption enables document and file access from any location. Since multiple users can work on a loan at one time, digital adoption removes the bottlenecks in the process that may occur when one loan originator is waiting for paperwork from another. Digital solutions also cut processing and origination times by rapidly delivering accurate data and verifications. More efficiency means better scaling and greater growth.

Digital adoptions don’t enable organizational agility during a crisis just because of convenience. As we’ve said, the best solutions feel at home in consumers’ increasingly digital lifestyles and will feel right at home in loan personnel’s toolkit, as well. And when organizations provide solutions that place the consumer at the center, consumers stick around. “This whole driver behind digital mortgage,” said Chris Backe, “is to meet the borrower where they want to do business.” Meeting the borrower in their digital landscape will enable better returns for organizations during and following dynamic challenges. 

“As technology providers, as lenders, as loan officers,” says Backe, “as much as we can remove the barriers to home ownership: that’s really the holy grail of digital mortgage.” Removing barriers for homeowners with digital adoption also removes dead weight that may hold an organization back during times of dynamic challenge. 

To hear all about digital adoption in the mortgage space, you can listen to Brad Lando and Finicity’s Lisa Kimball in their demo at Digital Mortgage 2020, and you can check out Chris Backe, Waterstone Mortgage, and Finicity’s Brett Moore in their webinar from October. Then start your digital adoption by requesting a demo.