The ultimate promise of technology in the mortgage industry is to improve the mortgage industry. It is such a simple, straightforward statement. And yet despite massive investments in myriad fintech solutions, improvements remain iterative and difficult to even quantify.
Here's where the disconnect happens. Any significant investment in technology should map to a predictable ROI. However, instead of business impact ROI such as asset yield optimization, fintech ROI is typically measured in operational KPIs such as processing turn times.
Which leads us to the one question industry executives should ask: When you make a fintech decision, is it a business decision? Or an operational decision?
The reactive operational decision vs. the proactive business decision
The reactive operational decision typically starts with a problem. Too much reliance on manual labor. Outdated data management or lack of data synergies between or across internal departments. The need to upgrade stack components to take advantage of new technologies such as AI. These are real challenges. But unless the solutions are considered within the context of business performance, they only deliver iterative operational improvements. Any impact on things like asset yields, pricing strategies or trading margins will be difficult to identify much less measure simply because deployment is not set up to capture them.
Using technology to solve an operational challenge vs. achieve a business goal also perpetuates the tactical habit of throwing software at a problem instead of developing a true solution. Witness the recent trend of embedding AI in software applications. Is it really driving business value? Perhaps for the software provider worried about getting left in the dust if customers don't see AI up front and center in the sales pitch. For the most part, customers may see a reduction in labor hours or faster turn times. But that's a far cry from advancing business objectives.
A proactive business decision looks very different from a reactive operational decision. It starts with a goal that, while operationally dependent, requires business level ROI metrics to determine success and justify the cost of the tech. Note the goal can be large or small. It can be enterprise-wide or apply to one division or business unit. It can be associated with a specific challenge related to a single asset class.
Regardless of the size or type of the goal, the idea is to be able to predict and quantify the value of the fintech solution in terms that translate into business impact.
Centering the approach around a business goal also ensures that to be considered any solution must go beyond operational objectives of speed and efficiency with highly specialized functionality rooted in the complex data science necessary to transform mortgage asset data into business performance.
Leveling up the team
Basing new fintech investment decisions on 'the why and how' of business goals automatically changes decisions on 'the who.' The driving premise is simple: you can't create a clear correlation between the investment and business outcomes without involving subject matter experts in solution design. For example, only a seasoned professional with experience in trading MSR knows the intricate ins and outs of the loan diligence and how it impacts the marketing of the assets.
If the business goal is to optimize the trading price of the MSR, advance invoice reconciliation is key to qualifying potential loan-level ROI which, of course, influences both price and bidding participation. Only data scientists and technologists prepared to collaborate with the experienced MSR trader will deliver a solution sophisticated enough to tackle the asset-level data and document management needed to produce advance invoice reconciliation as part of an automated MSR pricing solution.
Looking at your next technology move as a business decision will elevate the success metrics above and beyond meeting deployment deadlines and staying within budget. It will also ensure you have an answer to an even more important question: Was it worth it?
