Lenders must tread lightly in partnerships with Amazon, Google

Ubiquitous technology giants Amazon and Google probably won't compete in the direct lending space in the near future, experts suggest. 

The behemoths, despite past speculation, haven't indicated any efforts to originate mortgages. Instead, they've teamed up with industry players to offer data solutions. Lenders can enjoy the security, routers and other tech resources that Amazon Web Services and Google can provide, said Bill Elderton, chief technology officer at Roostify, Tuesday at National Mortgage News' Digital Mortgage 2022 conference in Las Vegas. 

"However, you have to watch your rights and your contract with an AWS or Google to make sure that you're not actually giving them influences or explicit rights to that data that's flowing through the system," he said.

The point-of-sale fintech in 2020 announced its partnership with Google to launch Lending DocAI, a software using Google's artificial intelligence capabilities to extract information from mortgage documents to speed up the origination process. The solution, similar to offerings by vendors like Blend and Ocrolus, doesn't compete with Roostify's own products, CEO Rajesh Bhat said at the time. 

Elderton called Google a great partner, and said he doesn't see the company as a competitor in neither direct lending nor POS systems. However, their meeting of minds is also a balancing act

"With a company like Google as powerful as they are, we had to be careful about giving them too many ideas, less they take that away from us and build it themselves," he said. "And so I look at them as a little bit of 'co-opertition' as people like to say."

Fintech lender Lower has a partnership with Amazon, said Derek Ochs, the firm's vice president of engineering. He didn't describe the scope of the firms' partnership, but lauded Amazon's machine learning capabilities, developed with massive resources smaller lenders don't have.

"In some ways, I think it democratizes it a little bit, that allows anybody to play in that field," he said. "But at the same time, I totally agree that they do have access to a mountain of data. And that's kind of untapped from the financial perspective."

Mortgage companies lag behind some of their peers in financial services sectors in the adoption of AI and ML tools, industry leaders told Arizent in a survey earlier this year. They cited a lack of skilled labor to implement complex hardware and software programs for a variety of uses. At the same time, the majority of mortgage respondents indicated to Arizent their companies are extremely effective at opening up access to data for employees. 

The complexity of the mortgage process will likely keep Amazon and Google out of the direct lending space, Ochs said. The household brands thrive in operations that are instead reproducible and scalable, like Amazon's shopping marketplace, Ochs said. 

"The financial sector is a little bit different," he said. "There are so many different players, so many different niche markets. It's highly regulated."

Elderton suggested the data concerns could be addressed by the Federal Housing Finance Agency's new Office of Financial Technology. The agency's new effort, announced in July, will seek to understand technology-driven developments and risks and assess responsible innovation in the housing finance market. 

The office will look at the use of big data, AI and machine learning, blockchain and other emerging technologies, said Anne Marie Pippin, associate director at the Federal Housing Finance Agency. The office has a request for information deadline Oct. 16, and will host a listening session in early October. 

Experts pondered aloud if mortgage companies were ready to close their widely acknowledged tech gap. Ochs called on firms to be able to provide executives with grains of data necessary to fill in the details of financial reports. Elderton said he hopes the mortgage industry can advance their tech abilities the same way banks and credit unions have. 

"But are we ready for a five year quick turn on that, like they were?" he said. "Are we going to fight it the whole way around? And that's what I think is gonna be really interesting over the next three or four years."