DIGITAL DIS­RUP­TION

Tech­nol­ogy isn’t a magic bul­let for suc­cess, and just do­ing mort­gages dig­i­tally doesn’t change how the busi­ness fun­da­men­tally works.

National Mortgage News - - Voices - BY RA­JESH BHAT

it’s 2017 and most re­cent home buy­ers still rank a day at the DMV above their last home clos­ing ex­pe­ri­ence. Ev­ery­one, in­clud­ing the fi­nan­cial ser­vices in­dus­try it­self, an­tic­i­pated that busi­ness-to-con­sumer “fin­tech” dis­rup­tors would sin­gu­larly re­de­fine how con­sumers ob­tain a mort­gage, sim­i­lar to what Sil­i­con Val­ley did for ride hail­ing and per­sonal tax fil­ing. Well, we’re still wait­ing.

Mean­while, the ramp­ing down of Sin­deo cre­ated more buzz than the av­er­age mort­gage orig­i­na­tor shut­down be­cause of its ven­ture back­ing and Sil­i­con Val­ley pedi­gree. There will in­vari­ably be talk about the demise (and reprise) of Sin­deo be­ing the re­sult of the com­plex­ity and high cost to build tech­nol­ogy to en­able an end-to-end on­line ex­pe­ri­ence. There will also be talk, par­tic­u­larly from es­tab­lished play­ers, of mort­gage be­ing a re­la­tion­ship busi­ness in which tech­nol­ogy has lim­ited space to in­flu­ence.

Don’t be­lieve it. The real take­away here is that tech­nol­ogy is an en­abler, not a cat­a­lyst it­self. As any suc­cess­ful mort­gage orig­i­na­tion com­pany knows, suc­cess is tied to cus­tomer ac­qui­si­tion and cus­tomer de­liv­ery. Just like many tra­di­tional orig­i­na­tors, Sin­deo strug­gled in these ar­eas. Tech­nol­ogy isn’t a magic bul­let for suc­cess, and just do­ing some­thing dig­i­tally doesn’t change how it fun­da­men­tally works.

The change agent is ac­tu­ally the con­sumer; tech­nol­ogy just helps make it hap­pen. Con­sumers vote with their thumbs and their feet and the mar­ket will re­spond ac­cord­ingly. At ev­ery op­por­tu­nity, in ev­ery in­dus­try, con­sumers have voted that they want the abil­ity to ap­proach trans­ac­tions on their own terms, and at their own pace. Banks that know this and of­fer the con­sumer op­tions for a dif­fer­ent ex­pe­ri­ence are al­ready on the jour­ney.

In fact, the whole in­dus­try is al­ready on the jour­ney, com­ing at it from dif­fer­ent di­rec­tions. OpenDoor and Credit Karma are mov­ing into the mort­gage bro­ker­age busi­ness, Zil­low and Quicken Loans are be­gin­ning to fa­cil­i­tate real es­tate trans­ac­tions, while be­he­moth banks are rolling out an en­tirely on­line mort­gage ex­pe­ri­ence. What do all of these trends have in com­mon? They are mov­ing to the con­sumer, rather than in­sist­ing that the con­sumer come to them.

It won’t be clear for a while as to how it will all play out, but it is safe to say that of­fer­ings that put the con­sumer first will be best po­si­tioned to cre­ate true trans­for­ma­tion in the space. One can also safely posit that as highly reg­u­lated as the space is, and — more im­por­tantly — as in­ter­twined with the sur­round­ing ecosys­tem of an­cil­lary stake­hold­ers (real es­tate, ti­tle, set­tle­ment, etc.), change will be in­cre­men­tal and ex­per­i­men­tal. If you’re wait­ing for the overnight Uber-like dis­rup­tion, you’re miss­ing the real change hap­pen­ing all around you.

Fi­nally, in this in­ter­twined ecosys­tem, it will take a vil­lage. In­no­va­tive part­ners fo­cused on ad­dress­ing con­sumer pain points will push the in­dus­try for­ward, such as a true “search and trans­act” self-ser­vice ex­pe­ri­ence for con­sumers. This gen­eral con­ver­gence of real es­tate and mort­gage is what con­sumers want.

Make no mis­take — just as legacy on-premise soft­ware providers were skep­ti­cal about their cus­tomers’ will­ing­ness and re­solve to move to the cloud, many lenders, ti­tle com­pa­nies, and real es­tate agents re­main un­con­vinced about con­sumers’ re­solve to con­trol more of their home buy­ing ex­pe­ri­ence, and can be ex­pected to ob­struct such progress. But true dis­rup­tion in this space will not be borne out of fin­tech’s fo­cus on dig­i­ti­za­tion. True dis­rup­tion is hap­pen­ing right now, and it’s rooted in how fin­tech is help­ing lenders meet the con­sumer’s de­sire to self-serve.

Ra­jesh Bhat is the CEO of Roos­t­ify.

As any suc­cess­ful mort­gage orig­i­na­tion com­pany knows, suc­cess is tied to cus­tomer ac­qui­si­tion and cus­tomer de­liv­ery.

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