Uncertainty should underpin your Lending Innovation!
When you strip back all the surface elements of the lending origination lifecycle, remove all the formalities of the process and take it back to just the customer and the bank, there is one underpinning emotion that separates success and failure in the lending lifecycle.
If you accept that assertion, then by isolating the stages of uncertainty in the origination lifecycle and in turn building mechanisms to respond to and reduce it, an organisation will be better positioned to unleash the full potential of their lending origination offering.
Not convinced? Let’s look at the key milestones (among many) within the property lending lifecycle and in turn isolate the critical periods of uncertainty that occur:
- The Property
- The Decision
- The Documents
- The Settlement
Consumers don’t buy loans – they buy properties, but in most cases the desire to buy a property necessitates the need for a loan. We fall in love with the street, we fall in love with the white picket fence, we fall in love with the downstairs living areas and the three bedrooms upstairs (maybe even dream about the pitter-patter of little feet in the hallways!). But then the prompt to pay for it becomes reality and the first moment of uncertainty in the loan origination lifecycle is surfaced.
‘Quick Yes, Even Quicker No’ was a mantra instilled in me 20 years ago as a lender and was essentially a reminder for me to reduce the uncertainty for my customer. It’s fair to say that the mantra itself is still as relevant today as it was two decades ago – I’d even suggest it’s more relevant in the Digital Era.
So disruption in this space requires reducing the traditional manual hand-offs by leveraging technology that provides seamless, real-time decision making at the closest point to when the customer first falls in love with the Property.
An extension of the above applies to the Lender and Risk Manager alike. Our teams are well aware of the responsibilities of their role in ensuring that the loan is suitable for both the customer and the bank. The skills of both parties come from their ability to adequately interpret and apply the policies and compliance that wrap around our lending obligations, whilst minimising the period of uncertainty (The Property). The uncertainty that often underpins the Decision making process cannot be understated.
Disruption in this space requires technology that can consume and apply the policies and compliance in a dynamic manner that will in turn reduce the potential for misinterpretation and error by the Lender and Risk Manager roles.
The formalities of the loan offer are essential in the highly regulated consumer lending market so providing customers with a clear, concise and timely view of their obligations will ensure the acceptance of the offer can occur without compromise in the downstream settlement. Historically, we were at the mercy of a physical process where bundles of documents were dispatched by road or air. This often meant that the uncertainty of whether a customer accepts the terms and conditions was compounded by the uncertainty as to whether the physical documents would actually arrive at their destination!
Once again, true disruption will be driven by the organisations with an appetite for harnessing digitisation and applying that to the electronic preparation, dispatch and delivery of those documents. An added element of disruption is for those who exploit the security and speed that comes with Digital Signatures.
There is no more emotive moment in the lending lifecycle than the days, hours and minutes leading up to the Settlement transaction. Having had the luxury of being a settlement clerk in a previous life, I know first-hand the sensitivity of the transaction and how easily the settlement exchange can fail by nothing more than a misplaced letter or number. Meanwhile in the background a customer is left waiting alongside a removal van with the uncertainty of whether they will be allowed to collect the keys and cross the threshold of their new home.
Disruption at this stage is at the mercy of collaboration between banks, local government authorities and conveyancers in leveraging existing technology and capability to support electronic conveyancing.
E-conveyancing allows the review and exchange to occur without the pressure of those final minutes of uncertainty and provides the ability for real-time review (and repair) as well as electronic exchange in a manner that ensures the customer can turn the key for their new home as scheduled.
Many like me share a vision that if we can successfully address the issues highlighted above, then the Lending Origination lifecycle will no longer be underpinned by the historic levels of uncertainty, but instead be underpinned by the love that the customer first felt when they initially set eyes on their new home.
So with the opening title in mind, uncertainty should underpin your Lending Innovation – as long as you are driven by the intent and determination to remove it in its entirety.