This blog post is part of a series of publications on fintechs and mortgage lenders that Reggora has developed in collaboration with a number of premier industry thought leaders. Download the Mortgage Lender’s Guide to Working with Fintechs for free here.
The Discovery Process
Every organization has pain points that they struggle to overcome. However, what distinguishes industry leaders from the rest is the ability to strategically pinpoint these challenges, measure their impact, and then successfully identify a potential solution.
As a result, although working with fintechs can sound appealing from a high level, the key first question that you need to ask is “how do I decide where a fintech would provide the most value?”
Sherry Graziano, SVP at SunTrust (now Truist), has dealt with this question before and provides straightforward advice on how to find the answer: focus on your client journey. Graziano says that discovering your organization’s most pressing needs and gauging whether fintechs can provide an adequate solution always involves three steps of “mapping out where you are to date, acknowledging your gaps, and then prioritizing the opportunities ahead.”
Once you complete this process, the analysis for how to find the right fintech is simplified.
Step One: Mapping Out Where You Are
A critical aspect of mapping out your existing pain points is ensuring that all stakeholders in your organization are involved - this includes both the management team and staff that are more involved in the day-to-day operations of your organization. Executive teams are often removed from some of the less obvious - but still critical - organizational challenges, and involving multiple stakeholders in the process can address this.
The appraisal, for example, is a widely accepted pain point that is sometimes overlooked during prioritization and optimization discussions because the industry largely accepts the status quo. However, a quick conversation with any appraisal processor, accountant, or loan officer, will shed light on the massive delays and costs that a manual appraisal process can lead to.
Step Two: Measuring Your Gaps
Once you have mapped your existing pain points, the next step is to analyze which processes are the most costly, or could deliver the most return on investment (ROI).
Such information is not always immediately evident. This will require a step-by-step breakdown of the loan process to determine how much time a given employee spends on each stage of the loan cycle, where borrowers are experiencing problems, and more. Business intelligence tools can also be used to discover hidden sources of cost and to place a tangible financial amount to them.
Completing such an analysis and quantifying the cost of smaller operations across your organization can illuminate the glaring (and not so glaring) gaps in your workflows. Only after completing this process are you able to clearly identify your main pain points that a specialized fintech may help alleviate
Step Three: Prioritizing and Alignment
Finally, once you have a clear idea of your existing pain points and how much each of them costs, you will then be able to prioritize for the journey ahead, factoring ROI into your decision and ensuring that all stakeholders are aligned with the goal. Paul Orlando of Flagstar bank shares his experiences deploying a new technology after such a process:
“All groups were aware of the importance and the sequencing of events. Everyone had the assigned tasks and adhered to the tight timeline. The product was delivered on the expected date, and thanks to all the training we provided, we were able to achieve a 60% + adoption rate within the first month.”
Aligning your team along the same objectives and including them in the entire process will be a key factor leading to success.
Finding the Right Fintech
Now that priorities have been decided, finding the “right” fintech partner is the next challenge. However, a strategic and multidimensional searching and vetting process will help ensure that your partnership will be a long term success.
The easiest way to gain exposure to fintechs is to attend both national and regional mortgage conferences where fintechs are on display—whether virtual or in person. Other strategies for finding fintechs include learning about which fintechs your competitors partner with, following leading mortgage technology publications, and attending webinars. Additionally, it is useful to consider fintech sales executives as partners and consultants above all else. If you can explain your pain points or issues to sales teams, then they are able to quickly provide you with useful information on the best ways their product can help you.
Evaluate the Technology
The most important part when vetting a fintech is to determine if the product actually solves the problems and priorities that your team has identified.
Again, here it is important to bring in the larger team. Operational level end-users will tell you if the product is viable and able to solve the problems that they face. Here it is helpful to create a “Technology Comparison Chart” to track which fintechs meet your needs, which fintechs are using the most advanced technology, and which fintechs will be the easiest to integrate with.
Contracting and Compliance
The contract and compliance steps are often the most time consuming, but can be streamlined if you convey clear expectations to the fintech about your due diligence standards. Additionally, you should not be wary of smaller or less established fintechs merely on compliance grounds. Often, younger and smaller fintechs use cutting edge technology, can respond to user issues faster, and have developed unique products and services.
Kevin Peranio of PRMG points out that “the size of a technology vendor and length in existence doesn’t necessarily mean better. Bigger companies can be a problem if they are built on archaic technology where there is too much bureaucratic red tape to get innovation accomplished.” Newer fintechs, on the other hand, tend to be more adaptable, quickly responsive to feature requests, and are user-friendly.
Additionally, Trip Jendron of Wyndham Capital Mortgage advises lenders to “think long term and be cognizant of the potential life cycle of the technology” during negotiations, and think about whether “your company growth will outscale the cost of the technology within the duration of the contract.”
Utilizing these tips will help ensure lenders and their fintech partners enjoy a smooth implementation and a successful partnership.
Want to read and hear more insights from industry thought leaders? Download the complete Mortgage Lender’s Guide to Working with Fintechs (it’s free!)
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