Christopher Brown of Fiserv: Lenders Warm Up to Open Banking
Christopher Brown is a Software Solutions Architect at Fiserv, Brookfield, Wis. He brings 20 years of experience to the role including experience as a front line mortgage loan officer. He can be reached at Christopher.Brown1@fiserv.com.
As the concept of open banking has matured, so have approaches to its use.
In the lending industry, open banking, which typically involves the use of application programming interfaces to connect various systems in the cloud, already has a strong foothold. Now, as the federal government and other high profile financial services providers have embraced the cloud, lenders increasingly consider open banking a safe and efficient option to hosting services in their own data centers. This is a positive development for reasons that benefit borrowers and lenders alike.
A better overall borrower experience
It is very difficult to offer a streamlined origination experience without embracing open banking and the cloud.
Many proponents of open banking point to the seamlessness of system connectivity it enables. How lenders connect with partners throughout the mortgage process is critically important and has a marked impact on efficiency. Beyond efficiency, and perhaps the greatest advantage of open banking, is the positive impact it can have on the borrower experience.
Staying competitive in a purchase money market requires making the borrower experience as easy, efficient and stress-free as possible. One of the legacies of the COVID-19 pandemic is that it transformed the way American homebuyers view technology. More and more, they demand an intuitive digital experience that is in lockstep with how they live their lives and carry out a multitude of everyday transactions.
The challenge for lenders is that now many borrowers expect this digitally driven lending process to be quicker and easier than ever before. While securing a home loan will never be quite as straightforward as ordering takeout in a mobile app, the end-to-end process can be dramatically simplified when everything required to underwrite and approve the new loan is seamlessly connected via APIs in the cloud. This ensures the borrower is not shuttled from one system to another in service to a checklist.
Better cross-sell opportunity
Lenders who understand how to use open technologies successfully are far more likely to capitalize on and win more business in a purchase money market, and a better borrower experience during the mortgage loan origination process is only part of the equation. Open banking also makes it significantly easier to cross-sell other financial services products to mortgage borrowers. APIs don’t just connect the lender’s origination platform to third party service providers. They can also make it easy to connect to other core banking platforms in use by the institution which, in turn, facilitates the sharing of marketing information with internal sales departments.
The result is better targeted cross-sell opportunity and potentially a larger share of wallet, tasks that were much more difficult to accomplish when various disparate systems were cobbled together with hard-coded integrations. Even better, marketers and salespeople will know as soon as a bank customer or credit union member applies for a new mortgage, giving staff at the financial institution a better understanding of the customer.
Access to more data for better mortgage marketing
Of significant importance in the current market is the wealth of information that open banking provides, which can be used for better marketing. This is important both to acquire new low-cost leads and to reduce fallout during the origination process.
Open banking provides the tools to allow lenders and their technology developers to create their workflows that demonstrate their own secret sauce. In a market where borrowers are seeking pre-qualification or pre-approval from a number of lenders, those lenders who know more about the borrower and provide a better experience will have an edge in winning the business.
For example, running multiple automated underwriting systems may have been problematic in the past, but today open banking simplifies that process. Now, lenders who choose to run multiple automated underwriting engines will know if they can offer the borrower a better deal or an appraisal waiver from one of the investors. This is the type of attention to detail that can ultimately win them business.
The same is true when it comes to shopping for private mortgage insurance or other settlement services. The lender who knows how to offer their borrower a better deal will stand out above the competition — and this is one of the benefits of open banking.
While these are three compelling reasons to take open banking seriously, there are other benefits as well. Open banking allows the lender to:
- Automate custom workflows more easily
- Improve service levels from partners and other suppliers
- Automate ordering and report ingestion
- Verify the borrower and other stakeholders
- Reduce human error through increased automation
- Lower overall costs
- Speed up loan origination cycle times
Open banking is here, and its impact on the world of lending is undeniable. Modern loan origination systems have been architected specifically to enable open banking, with robust API ecosystems that make it easy for lenders to start strategically and build up to their ideal workflows. Now is the perfect time to begin building those processes and reap the potential rewards.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)
