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How Tech Can Help Mortgage Lenders Stay Ahead of Fintech Competitors

Learn to swim rather than sink against the emerging tide of competition.

Joe Welu Headshot
Joe Welu
Five swimmers race with the center swimmer in the lead

In today’s increasingly digital-first world, new direct-to-consumer financial technology (fintech) players – also known as consumer-direct fintechs or neobanks – now compete for the same mortgage and housing loan opportunities as traditional mortgage lenders. To put that into perspective, according to the Mortgage Bankers Association, the U.S. mortgage industry is projected to fund $2.56 trillion in new volume in 2022 alone. This is a glimpse at what the prize at the end of the race looks like.

Despite their recent emergence, consumer-direct fintechs have been valued in the global market at $35 billion as of 2020. This number is predicted to grow at an annual compound rate of nearly 50% from 2021 to 2028. Knowing this, it’s no surprise that traditional financial institutions feel the need to shift gears quickly before these fintech disruptors dominate the industry. 

The good news is that traditional lenders can learn to swim rather than sink against the emerging tide of consumer-direct fintech competitors. By implementing the right technology within their organizations, traditional financial institutions can stay ahead of the competition. To achieve this, however, a business must first ensure that their technology automates and enhances processes for its loan officers.

A Difficult Market Ahead

The mortgage industry has long seemed ripe for new fintech entrants to challenge incumbent lenders. But what “easy money” existed in recent years may already be gone. 2020 and 2021 saw a massive wave of borrowers refinancing at a lower interest rate, and refinances now represent around 50% of outstanding mortgage debt. As rates continue to rise, that total mortgage origination volume has been forecast to fall by 33% to $2.56 trillion this year. 

Though healthy refinancing options will be available, it’s unlikely that new competitors will become true disruptors without significant loan origination. For example, after making headlines by purchasing mortgage lender RedDoor in late 2021, Opendoor has only 10 mortgage loan officers – a small sales team that likely won’t move the needle amidst a market that’s expected to fund nearly 6.8 million home loans in 2022. 

The complexity of the mortgage industry is among the many limitations keeping consumer-direct fintechs from taking hold and creating sustainable scale with borrowers. Housing and mortgage regulations are among the strictest in consumer financing, and referrals that stem from builders or realtors are subject to many federal rules. Mortgage markets are strongly influenced by referral networks and specialized advisors, so having strong relationships – and the capacity to manage the risk of those relationships – is essential for owning a purchase market. 

Between the strength of lending giants and the complexity of the mortgage sector, there is a difficult – but not impossible – barrier to climb keeping new fintech competitors from making an immediate dent in market share. But the more important question that traditional lenders need to understand is why these entrants are appealing to customers and pose a legitimate threat. To do this, lenders must acknowledge how technology can help them better provide what their borrowers expect from them.

Address ‘Why’ When Choosing

To equip sales teams for success, lenders need the right tools in place. These tools should be made with the future of lending in mind and include the technologies and systems necessary to execute marketing strategies at the right time and place. When assessing and implementing business technologies, the two factors organizations should prioritize are centralization and integrations.

Having a centralized system will enable teams to track and report on all sales and marketing activities through all channels. As a result, employees will be empowered to efficiently go to market and quickly finish routine administrative tasks, freeing them up to tackle more fulfilling projects. Cultivating life-long customers while gaining new ones is more important than ever and having a unified system for delivery and collaboration guarantees that existing, new, and prospective customers can feel personally understood.

Importance Of Integration

Once organizations compile best-of-breed solutions, they can optimize their technology stack. Considering the speed of innovation, these technologies will inevitably evolve just as the needs of the business will. As companies build their systems, it’s imperative to avoid unintentionally limiting what systems will and will not be able to do, particularly from an integration perspective. Today’s lenders have massive amounts of data to protect and manage. And consumer expectations have only increased – lenders must now communicate with customers across all channels in record time.

Efficiency-boosting technology solutions like CRM and customer engagement platforms will provide traditional lenders the advantages needed to compete against consumer-direct fintechs. These solutions allow businesses to take charge of marketing and sales activities from a centralized environment that can help ensure the business is compliant with complex regulations – a critical tool to have in the financial services industry. The right technology can also use data to gain knowledge of how customers and prospects are interacting with marketing and sales, which helps them to make well-informed decisions about how to better connect and engage with them moving forward. 

Through an integrated technology approach, this enables smarter marketing throughout all platforms, allowing for the unified integration of other best-of-breed solutions to be used together, as opposed to working in siloed operations.

Tech For Strength

Digital transformation can’t be stopped. Traditional lenders can choose to get their teams onboard, finding and integrating the right technology that enables them to not only survive today’s transforming business landscape, but thrive against new consumer-direct fintechs and neobanks. Leaving outdated tools behind and embracing new solutions to help optimize business processes while scaling growth will be the key to success in ensuring traditional financial institutions remain strong competitors.

Traditional players have one big advantage – the strength of their human-first customer connections. While most fintech companies eliminate the need for personal customer relationships, traditional lending institutions can disrupt the disruptors by leveraging technology that empowers them to continue a human-first approach, which will create a financially healthier world as a result.

This article was originally published in the Mortgage Banker July 2022 issue.
Joe Welu Headshot
Joe Welu

Joe Welu is founder and CEO of Total Expert, a fintech software company that delivers purpose-built CRM and customer engagement for modern financial institutions.

Published on
Jul 20, 2022
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