Are you ready for alternative lenders?
Wednesday, June 4, 2014
Posted by: Tim Mislansky
Most credit unions are interested in attracting young adults or millennials to their institution. These are folks who are in their prime borrowing years. They need credit cards, car loans and eventually a home loan. Credit unions are trying to figure out how to serve this group with their heavy usage and reliance on technology.
A recent survey by Accenture reported that 72% of 18-34 year olds would be “likely” or “very likely” to bank with companies like Apple, Google or Wal-Mart. Also, there is a public proposal out to have the U.S. Postal Service offer traditional banking services. Why would younger folks consider doing business with these folks instead of a traditional financial institutions and what’s it mean for credit unions who want to be “memberlicious” as a mortgage lender?
Well, first off this seems a bit scary for a main stream lender. We have methods and traditions in place about how we do business. If Google or Apple, who already have lots of information on us, our spending habits and in some cases our personal financial institution ever decide they want to get into mortgage lending, you can be sure they won’t do it like we do.
They’ll be fast and they’ll use technology and leverage it to be a low cost provider. And they will turn that into a price competitiveness that will be tough to compete with. It could forever change the way mortgage lenders do business and, gasp, make credit unions and banks irrelevant in the home lending space. Am I being overdramatic? Perhaps, but these firms have changed the way we live with music, access to friends and family and information, so what’s to prevent them from getting into financial services and mortgage lending?
Even if it never comes to fruition, we need to be prepared. What should credit unions wanting to be “memberlicious” do?
1. Get to the member before they are ready to buy a home. Find a way, whether it’s through down payment saving programs or education or realtor programs to get to the member before they are ready to start looking for a home. Otherwise, we’ll lose them to someone else.
2. Make our technology top notch. We can’t lag behind in our ability to use the web to do home loans. Most of us have an online application that is slick. Whether it’s MortgageBot or Accenture Mortgage Cadence (the old Prime Alliance) but this just puts us on equal footing. And some credit unions are still using a simple form on their web site to gather data and not integrate with the credit bureau or an automated decision tool. Worst yet, some credit unions still put out a PDF for a member to download and complete by hand. And most of us are behind the times on easy, technology driven way to gather and deliver documents to members. We’ve got to get with the times and get ahead.
3. Look at the operations and drive out excess cost. Credit unions historically have been nice people (not that the banks are mean), but we tend to be forgiving in terms of the operation. We’ve got to find more ways to get better performance out of our people and do the old saying of work smarter and work faster. We can no longer allow someone to keep working for us if they are not productive just because they try hard. It sounds a bit cold, but it doesn’t have to be. I’m not suggesting we give pink slips to people in mortgages who can’t produce at the necessary levels, but we can help them find some other role at the credit union that is more aligned with their skill set.
4. We need to hire the best people. Despite all the wonders of technology, buying a home is still a big deal and it often requires hand holding. Credit unions constantly need to be looking for the best people. The world used to be about people, technology and processes. It still is, but the technology and processes are often the same or at least table stakes. Credit unions will win at being “memberlicious” if they have the best people.
5. And we’ve got keep an eye of the non-financial institutions when they start playing in our space. This post was brought about by reading an article about the Google car and the author suggesting that perhaps Google will get into the financing game. We need to be vigilant of what the big tech companies are doing not be caught off guard one day.
For in the end, the giant tech companies are constantly looking for ways to change the world and perhaps mortgage lending is a part of the world that needs changing. So let’s lead that change and not be followers.
This article originally published at Mortgages are Memberlicious here.