How Lenders Are Redefining the Industry with New Technology

Fear of the unknown is an entirely rational response. The conservative policy of “look before you leap” has always been one of the central tenets of financially responsible and stable lenders. “Compared to other industries, the banking industry has been slow to embrace the digital revolution,” in the words of Christophe Chazot, Group Head of Innovation at HSBC.

However, fear of the unknown can be a stumbling block when it prevents the adoption of technology that can provide greater efficiencies and a measurable ROI. Lenders that have evaluated and implemented technology are operating with a competitive advantage in the market. One of the best examples is JPMorgan Chase and its introduction of a new policy for more aggressive loan targets earlier this year. Technology has allowed Chase to generate standardized loan documents that lower operating costs in order to cut closing times to 45 days or less, which is twice as fast as some other banks.

4 Ways Technology Is Changing Lending

Technology has been instrumental in driving improvements in several other core functions of lending, including:

  1. Helping lenders comply with federal, state and industry regulations.
  2. Managing more accounts with greater accuracy by improving workflow.
  3. Reducing human error while expanding service offerings through improved efficiency.
  4. Introducing more reliable third-party management applications that lower risk and boost revenue.

Industry Insights
Here are some insights from lenders, appraisal management companies and other industry analysts who have seen success in adopting new technology, as well as those who are still seeking the ideal technological solution:

  • Andy Greenawalt, cofounder and CEO of Continuity Control: “I’ve witnessed community banks that still rely on paper systems to manage compliance. This is nearly unfathomable when one considers that more than 16,000 pages worth of regulatory changes were issued in 2013 alone. The staffing costs to maintain systems like these will only continue to increase.”
  • Noah Grayson, founder and managing director of South End Capital Corp: “Service speed and efficiency will be a critical motivating factor for brokers and borrowers in choosing their capital sources, and thus it will be a major differentiating factor for lenders in all sectors. The usual line items–rate, term and prepayment penalty–are still important, but the ability to close, and close quickly, trumps all.”
  • A study on risk management from Ernst & Young: “As the demands being placed on banks by regulators ramps up, technology tools are enabling institutions to meet their compliance obligations in ways that were not possible just a few years ago.”
  • Andrew Luzod, Real Estate Risk Groups, Fifth Third Bank, during a panel discussion at the annual EDR summit: “The challenge for us is to convince the people that we report to that it is important to keep up with technology and the many ways it could be used. For example, GIS mapping of portfolio data could assist in identifying concentrations by loan type or product type. We don’t have that capability right now. I’ll admit that I’m challenged sometimes by technology, but once you start to understand the power of technology and what it can do for you, your wish list starts growing.”

With increasing demand for revenue growth and shorter customer life cycles, new technology has become essential for staying competitive in the deliberate and careful tasks in lending, such as due diligence and appraisal compliance. Facing the challenge of an increasing regulatory burden, it is imperative that today’s lenders look to leverage technology to ensure future success. The most successful lenders are those who continually find ways to use secure technology to do more for their customers, and do it faster than traditional lenders.