It is no secret that large banks are getting out of the mortgage business, while an influx of online lenders and Fintech companies are entering the space. Self-serve automation and alternative funding sources have allowed these new competitors to take the lead in offering more mortgage options at a lower cost structure.

Consider what the following trends imply about things to come:

  • In 2011, 50 percent of new mortgage loans were funded by the three biggest banks in the U.S. By 2016, the share of loans by the same three banks fell to 21 percent.
  • Between 2011 and 2014, non-bank lending jumped from 14 percent to 37.5 percent of the market.
  • 54 percent of smartphone users overall said they would be happy to switch banks if they found a better app somewhere else, according to a survey conducted by SNL Financial. Millennials took the lead in this category, but nearly a quarter of Gen X and Baby Boomers agreed.

Why is this happening?

Competing Narratives

One narrative suggests industry shifts are due to heavy regulatory environments, the increased costs of doing business, or just simply stiffer competition.

Another, equally relevant answer is that today’s consumers simply prefer to work with tech-centric lenders who adapt more quickly to changes in consumer preferences:

“Every few decades,” wrote Isaac Kassin, co-founder of startup Exeq, “one generation comes along and disrupts an economy with new innovations, proving that things that were once deemed necessary are now outdated or inefficient. Today, as the largest and most technologically adept generation in American history, millennials are poised to force just such a change in the banking sector.”

The New Home for Millennials

The National Association of Realtor’s 2017 report on generational trends found that the largest group of today’s home buyers are millennials. This generation relies heavily on familiar technology to support their decisions.

Millennials are looking for mortgages not from banks alone, but from any lender that can deliver the best user experience for them on their preferred devices. The tech sector tends to invest more time and effort on UX, which is why Fintech companies have been able to out-maneuver traditional financial institutions in this area. Banks have been slower to recognize these trends and adapt to this new reality, but it’s not too late to change that.

Behind the Financial Wheel

Online lenders have done a lot to automate transactions and open up mobile communications channels as traditional banks only made incremental changes. Even though millennials prefer mobile banking options three times more than other generations, what they really want is a better handle on their spending and savings.

Moreover:

  • This presents a golden opportunity for banks to go above and beyond and create unique user experiences that put not just millennials, but all generations in control of their financial futures.
  • New growth in leveraging significant numbers of underbanked consumers and underserved markets in the U.S.
  • Tech-friendly and nimble operators are paving the way forward, unlocking opportunity in sectors that larger banks have chosen to ignore.

A New Direction for the Customer Journey

Fintech startups are not just delivering better customer service, they are investing in innovative tools to exceed customer expectations. A good example is Venmo, which added a social feed and gamification badges into its peer-to-peer lending app.

That gave users a good reason to spend time in the app and invite their friends, even when not sending or receiving money. Smart strategies like these made it easier to reset how customers interact with financial services, charting a new customer journey in terms of digital, physical and emotional goalposts along the way.

For retail banks looking for new tools to help them remain competitive, a comprehensive suite of digital solutions have come online recently, showing them the way to better serve their best customers. These include online lead response platforms, customized mobile apps and online reputation management software.

In addition, mortgage companies have created standardized training programs that cover virtually everything a new originator requires to meet the expectation of today’s home buyer. One of the best examples is LaunchPad, an all-inclusive training platform for “new-to-the-business” loan officers.

The Past Is Not a Predictor Anymore

The next generation of mortgage companies will transform themselves by developing a better process for implementing change faster. A dedication to the customer experience is driving continuous improvement toward a simpler, more streamlined mortgage experience for the borrower.

The past is no guarantee of future success, especially in a rapidly changing and competitive mortgage space. Big banks are just now coming to realize that they can no longer compete in this industry using old-fashioned tools and outdated marketing programs.

Innovation is a process that never ends and demands constant improvement. That’s why we devote resources to research and experimentation to validate customer needs. From there, we are better able to develop intelligent products and services that our customers truly desire and are willing to pay for. This formula has proven to be an incredibly successful way to upgrade our central value proposition and our path to growth as a company.

Learn more about Scrappy Labs and APMC’s innovation efforts here.

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