Integrating your business with technology  is key to avoiding disruption of its future.

Today’s Landscape: The Risk of Disruption

Unlike other industries turned upside down at the hand of technology, private lenders have yet to see a true disrupting force change their landscape. Disruption is not a matter of if but rather a question of when. Let’s look at the data.

Technology platforms are making it easier for borrowers to find money and close transactions. In the last decade, online mortgage lenders have seen annual growth at around 30%. In the first half of 2018, global fintech investment hit a record high at just under $60 billion, with heavy hitters like JPMorgan that have committed to spend just over $11 billion in 2019. In May, Bloomberg reported that Spain’s Banco Santander SA will invest $22 billion into digital transformation and information technology in the next four years. We can expect to see much more of this in the coming years.

Consumer behavior is also driving commercial tech adoption. According to a 2013 study across 10,000 millennials, almost 75% of millennials expect technology to overhaul the way banks work. That same group would also rather handle their financial services needs through technology companies like Google, Amazon, Apple, PayPal or Square.

With a clear shifting tide in both the future of lending and a generation of future business decision makers, the private lenders who realize that adopting technology is the key to their future will be well placed to avoid disruption.

As a private lender, you might consider that without the resources, funding or expertise of the large financial institutions, getting started may be impossible. But that does not have to be the case.

Getting Started

Often, the inspiration to  future-proof your company might lead to grand ideas of building out an entire custom platform. Step one here is to  get a strong understanding of your company’s goals. If  you’re a lender, you are originating loans and your goals are likely to include closing more transactions. Stay focused and ask yourself: “What problem are we trying to solve?” Chances are that your problem has already been solved (i.e., someone in the industry has already used software to achieve a similar goal).

If you do discover that you’re in a situation in which someone else has already found a solution, you may have a wide variety of solutions, such as software as a service (SAAS). SAAS is a market-based solution, meaning that SAAS companies are not only selling to a specific segment of the market but their product research and feedback is also coming from the segment into which they are selling. Rather than building or buying custom tools, buying SAAS gives you the ability to leverage the best people in the world focused on addressing your issues.

SAAS product development is also based on an overwhelming number of data points that extend beyond the confines of a small or mid-sized business. When you use SAAS, you can avoid the heavy customization in home-grown technologies that are difficult to scale. SAAS offers scalable, crowdsourced innovation at a predictable price.

Evaluating Technology

Assuming you are now in the market for a new SAAS solution, how do you best evaluate your options? Given that every company is different, you may need to add or subtract from the framework below. It is designed to not only help you stay focused but also to be a more educated and informed buyer.

• Frame the problem // Before you investigate the landscape of what technology is on the market, think about your business’s needs. Some lenders want a CRM to manage pipeline. Others want a tool to manage the closing process. End-to-end solutions will likely give you more features than you want and fail to deliver on what you need for your business. The more focused you are, the better off you will be.
• Gather requirements // Now that you know the problem, think about what you need to fix it. These fall into the categories of nontechnical success criteria, such as cost or time savings, or technical requirements, like the ability to integrate with your existing technology. Keep in mind that any good vendor will work to understand your requirements  to align to your needs. To sell a solution, vendors need to ensure that it is solving your problems. If it does not, they either will not close the sale or the product will quickly become shelfware.
• Research // In the same way you underwrite a loan, do your due diligence on the options. The best way to find technology is to ask colleagues or industry peers. Attend trade shows and read industry publications, all of which are filled with the latest in technology trends and vendors. A simple Google search will also bring up company websites and blogs discussing a variety of tools.
• Regroup // Now that you know what is out there, how did the options stack up against your framework? Did they check all the boxes? Did you add any requirements you didn’t initially have? Measuring twice and cutting once gives you the ability to review everything at once to make the right decision.
• Engage // You’ve decided to use technology, hooray! Time to get going!

As your business evolves, it is critical to partner with vendors that have flexible and extensible platforms. The premise of the previous list is staying focused, but you will inevitably look to technology to grow and scale other parts of your business. Keep in mind that being locked into a rigid platform hinders business growth and destroys innovation.

Implementing Technology

Now that you have successfully navigated the vendor process, the next step is making sure your company uses your newly acquired technology. The following tips are aimed at avoiding the pitfalls of a difficult technology rollout.

• Take baby steps // The approach here is the same as when you initially framed your problem: You started with a narrow focus. Implementing one solution at a time gives your team the mental bandwidth to learn a new platform and formulate new habits while continuing to focus on their day-to-day responsibilities.
• Mandate // Mandating that all employees use new technology is vital. Fifty percent of IT projects fail. At the end of the day, there cannot be a middle road. If you waiver on buy-in from everyone, the time and money you spent investing in technology will be wasted.
• Engage with your employees // Whether it is once a week or once a quarter, ask your employees for feedback on the effectiveness of the technology. Understand whether they like it or if there are additional pain points. It is possible that there are limitations of functionality or your employees might not fully understand the extent of the product offering. Your engagement will lead to better business decisions.
• Form a digital transformation committee // Take engagement with your employees a step further by forming an internal committee. Compile a mix of business and technical stakeholders in your company so that you are hyper-focused on the right solutions. This will allow you to address business challenges or operational goals versus making technology procurement decisions in a vacuum void of checks and balances.
• Lean on your vendor(s) // Most technology vendors provide onboarding services as well as additional training services. You have limited time as it is, and you bought SAAS because you wanted experts in your field. Lean on them for insights and hands-on work for your team. It will pay dividends.

Parting Thoughts

It is easy to take the approach that if things are not broken, they do not need to be fixed. With clear trends and lots  of available solutions to take your business into the next  generation, how will you  think about future-proofing your company?