As volumes decline and the industry corrects, thinking about technology is also changing. Getting the newest software application isn't being viewed as the best decision anymore. And on the other side, investing in a vendor just because they have tenure in the space doesn't make for the best decision either.
And lenders are getting it. They are increasingly looking at vendors that align with their business strategy. By the same token, they're looking at technology that will get them closer to their company goals. So what does that mean exactly?
For a community bank, they want to get closer to the borrower, so outsourcing core processing to focus more on the point-of-sale might be the way to go there. For larger lenders that have grown through acquisition, looking hard at consolidating redundant systems and re-evaluating enterprise architecture may be a high priority there.
Similarly, as technology investment becomes more strategic, higher-level executives are participating more in making these decisions, noted Ann Benner, project manager at consulting firm Prymak LLC. "It used to be that you'd speak directly to the manager of the department originating loans. Now when you walk in the door you still have to make that group happy, but you have to make the decision maker happy first.
"Quite often, the CEO is even brought in to make the final decision. It is harder to convince decision makers in today's market because they're not involved in the process on a day-to-day basis. It's harder to sell into the market, but you have more buy-in and there are fewer territorial arguments after a decision is made," said Ms. Benner.
The process itself is also longer and lenders are defining how things are done instead of just listening to the typical vendor pitch. "Instead of walking in and saying you should buy this, we ask them what they want the technology to do," pointed out Ms. Benner. Prymak makes a point not to endorse any vendor, which is a departure when compared to some other consulting firms.
"We document what the lender wants the technology to do and assist them in doing research. We make sure we check the budget as well. We'll bring them our results and they'll choose who to interview. Vendors go through a scripted demo. The demo is defined by the client and not the vendor.
"We will also assist in implementation," noted Ms. Benner. "We can help identify documents that need to be transferred, map the data, define reports, etc. Our focus is not on selection, just research. Most of our competitors align themselves with a vendor and say you need this product, whereas we ask what the lender wants from the product. We don't endorse vendors, we match business requirements with all the vendors out there. That's what lenders want today."
With the CEO calling the shots, what does that mean for the course of technology innovation? Like anything else, certain CEOs will see the advantages of leading instead of following and those lenders will pull ahead as the leaders in this space shuffle around. When will the long-term winners truly emerge? We'll just have to wait and see.
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