2020 Trends in Lending

Feb  13 
Nicole Valentin-Smith  Director, Client Management, Digital Lending and Origination, Fiserv 

Borrowers' changing expectations fuel new demands for lenders

Influenced by easy, intuitive digital experiences in other parts of their lives, today's borrowers have heightened expectations when applying for and managing loans. For the lending industry, 2020 will be defined by how well it meets those new demands.

Not that long ago, many believed borrowers would not be receptive to such digital options as applying for a mortgage online, signing auto loan documents electronically or providing financial information to a lender through a smartphone. But almost two-thirds (65 percent) of people who apply for loans now do so either partially or fully online, up from 56 percent in 2018, according to Expectations & Experiences: Borrowing and Wealth Management, a 2019 consumer trends survey from Fiserv. 

Those changes are driving advancements in technology, which, along with regulatory challenges, market pressures and economic uncertainty, will keep lenders on their toes in the coming year.

Here are three trends to watch:

1. Borrowers' Evolving Expectations for Lenders

Borrowers want their mortgage or consumer loan application experience to be just as easy and perceptive as their last best retail experience. If Netflix and Amazon know you, shouldn't your lender? The reality is the industry is not yet meeting those expectations, although many lenders are working toward a more fully digital borrower experience.

For lenders, that means assuring borrowers you know them, you value them and you promise to make it easy to work with you.

How does knowing a borrower change the application process? If borrowers apply for mortgages at their primary financial institutions, don't ask them for known information such as their address and account numbers. Similarly, don't request the same document more than once. When that happens, it exposes a disconnect between the borrowers' experience and back-office processes.

A borrower sees only the tip of the mortgage iceberg. But what lies beneath – the processes, technology and resources that support a mortgage – is massive.

2. Technology Investments Enable New Efficiencies

Over the past decade, many lenders added to their staffing budgets to cope with increased regulatory pressures. The average cost per mortgage is $7217, including average personnel expenses of $4,871 per loan, according to the latest figures from the Mortgage Bankers Association. In 2020, look for lenders to begin shifting some of those staffing costs toward technology investments.

Mortgage loans are particularly complex and involve multiple participants, including third-party agencies. For best results, lenders need to be integrated with everyone involved in mortgage origination. Yet, that is where many lenders struggle, resulting in decreased efficiencies and a borrower experience that falls short of expectations. Strong mortgage origination platforms can address those problems, in part by automating back-end processes, workflows and data analysis.

A borrower sees only the tip of the mortgage iceberg. But what lies beneath – the processes, technology and resources that support a mortgage – is massive. What happens on the back end influences the story lenders can tell in the marketplace, including shorter closing times.  

3. Self-Service, Omnichannel Capabilities Take Hold

Borrowers want control of the lending process. That may mean shopping for rates online, applying for a mortgage at 2 a.m. or getting an answer to a question via chat. They want action and the instant gratification of knowing where they stand. Are they approved? What's next?

Technology should seamlessly connect the borrower with the lender to provide a holistic, self-serve digital experience. Borrowers should be able to pick up the application process wherever they left off and through whatever channel they choose, from mobile to the branch.

Ideally, if a borrower moves from one channel to the next, it ought to be on their terms. When they're online, don't ask them to email a document to you instead of uploading it, for example. If they're using a smartphone, that's probably how they want to communicate with their lender.

What's Next for Lending

For lenders, there is much to consider in the coming year. Getting the borrower experience right has never been more important, and compliance issues and the complex regulatory environment for lending are here to stay. At the same time, competitive pressures are building from traditional lenders and disruptors.

To compete in 2020, lenders will need to consider fully digitizing the loan lifecycle to achieve greater transparency and cost effectiveness while delivering the experience borrowers expect. Digital lending strategies are no longer just an option.