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The Trends That Are Making 2018 a Standout Year For Digital Lending

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What’s driving the boom in the adoption of digital solutions to age-old mortgage lending problems?

by Emily Nash-Walker, Team Lead – Pre-Sales Solution Architect

Companies around the world have been signaling for years that they are interested in developing better digital products that can make their jobs easier and more efficient at the same time.

So far, 2018 is proving to be the year in which those projections are realized.

Many companies have conquered the early hurdles that they faced in setting up, and are growing more accustomed to integrating a hybrid model for attracting, servicing and retaining customers. A new white paper from research and digital financial specialists, Javelin, pinpoints the various trends that are shaping the digital migration in 2018, with particular focus around the issues of digital lending and end-to-end digital mortgages.

In the paper, entitled 2018 Digital Lending Trends, the author writes “For prospective borrowers [digital interactions] means far less friction between the application and funding stages of a loan. And for lenders, the acquisition, loyalty, and cost benefits of transitioning to digital are finally being realized.”

And for all the change that is happening, the report notes that we are almost certainly only at the beginning of a very long and very profound period of disruption that will transform nearly all aspects of how people finance their homes, borrow money, buy cars and use the cryptocurrency assets that they may have acquired to borrow fiat currency.

But it’s the mortgage lending arena where most of the action can be found in 2018.

Let’s take a closer look at some of the detail that Javelin is observing in the industry.

Applications are a success story

Many consumers have begun to experience the benefits of a digital mortgage when it comes to the application side of the process. “30% of consumers applied for a new mortgage having enjoyed an entirely digital application experience in 2017, up from 24% the previous year,” explains Javelin, and that percentage is only going to continue to go up.

For younger consumers entering the market for the first time, the appeal of digital mortgages is overwhelming, and it mirrors the experiences that they have with many other large institutions in the digital age.

E-Closing is where the problems are

So digital applications are being integrated rapidly in 2018, but it’s on the other end of the deal - the closing - where massive challenges and opportunities still exist. “Consumer expectations for a frictionless digital experience can be utterly obliterated when confronted with the closing process.”

While a fully digital close is extremely hard to get right when done in isolation, it gets that much harder to execute when you add the regulatory and legal requirements of the lending industry into the mix. The over-abundance of paperwork and time-consuming meetings are the stuff of legends when it comes to borrowing money from the banks, and the very analog, linear nature of that process has not yet changed this to any meaningful extent.

But there are signs of progress. Three factors in particular seem to be occurring simultaneously, and they stand a chance of breaking the analog stranglehold of the closing process:

  • Growing comfort with hybrid closings.
  • Guidance from regulators and government-sponsored enterprises (GSEs).
  • Pressure from industry groups are motivating more states to adopt legislation that permits so-called e-closings.

Added to this short list should be consumer-driven demand for more efficient processes, which is underpinning much of the change that we are seeing.

Hopefully, these developments will bring the industry much closer to a complete digital end-to-end solution.

Opportunities are everywhere

It’s an exciting time in the quest for an end-to-end digital mortgage. Opportunities are ripe for an agile, tech-enabled company to come in hard and strong and define the digital mortgage for the next decade. Many early-movers are seeing the benefits already, and 2018 will see many more organizations rolling out innovations that attract new customers and simplify back-office processes.

The new technology will be extremely appealing both to experienced consumers who are familiar with what it takes to get a new mortgage completed, and with newcomers who expect a level of digital service that they have grown used to in today’s modern economy.

The section on end-to-end digital mortgages concludes with a number of excellent recommendations that lenders should embrace as they ride the waves of change.

  1. Partner with technology experts:
    The migration to digital is complex and it cannot be achieved by banks or mortgage lenders alone. They need to work seamlessly with partners who have the motivation to bring a fresh eye to the industry and design solutions that provide benefits to both consumers and to the businesses.

  2. Early mover has a distinct advantage:
    All the signs are there that the players who make the right moves in 2018 when it comes to solving the problem of e-closing, will attract a lot of attention and a lot of customers, and as a result they will be able to cement a place in the lead for some time to come.

  3. Communicate your digital end-to-end mortgages:
    Businesses must strive for a more transparent process, where the consumer understands where they are in the mortgage application process, and shares some of the responsibility in delivering, accurate, updated information online. The tools of social media and data-driven insights into consumer behavior allow companies to craft thoughtful and helpful communication strategies that will drive loyalty to the brand.

For more information on how to unlock the valuable insights contained in your data, and how to develop your own digital strategies, visit the AI Foundry website where we share our processes and solve problems for our customers.