Is it Time For Banks to Double Down on Tech?

What benefits might banks that double down on tech see in 2021?

Banks spent over half a billion dollars on new technology in 2020 and will spend even more this year. The numbers get much bigger when you factor in all of the other IT expenses, with the big US banks spending billions on their teams and tech. 

Even though COVID created massive uncertainty that served to slow new technology implementations somewhat, it was also responsible for a profound shift in the way bank customers worked with their financial institutions. 

According to Accenture’s Banking Technology Vision 2020, 79% of banking executives agree there is a need to dramatically reengineer the experiences that bring technology and people together in a more human-centric way. It may sound counterintuitive, but that’s going to take new technology. 

But how much should bankers expect to spend on new tools? 

Time to double down 

That’s a simple question with no simple answer. It really does depend upon the institution, its goals, its current tech stack and its positioning in the market. But if you need a simple answer, it would be “more.” 

According to an article I came across recently in the Financial Brand written by Jim Marous, 2021 will be the year financial institutions need to commit: 

“In 2021 financial institutions will need to determine their commitment to improving digital banking experiences and prioritize technology investments to support a multichannel future. In other words, organizations of all sizes will need to evaluate their digital transformation journey in light of what has occurred in 2020 … and what will be required in the months and years to come.” 

I have to agree, but throwing money at a problem has never resulted in satisfactory solutions. Lenders have to invest intelligently. 

Two approaches to technology investment 

Now is the time for institutions to be planning to spend the windfall they earned in 2020. Those that don’t invest in the right technology must settle for enjoying the best two years in their company’s lifetime and then suffer the consequences now that interest rates have finally risen above 3%.  

If you’re a mortgage lender, you have to invest. But where? 

I see two common approaches in the industry today. The first approach is investing in your manufacturing process to control costs. 

Even the best technology will fail if users don’t adopt it. Focusing attention on the back office can set a lender apart, making it easier to recruit top talent. In addition, a smoother user experience makes it easier to streamline processes and keep loans moving smoothly to close. 

The second approach, is to make investments to improve the borrower experience. It’s hard to argue with this approach because changing consumer demands and increasing competition make this a requirement. 

If you don’t invest in a better borrower experience you will lose your borrowers to someone who will. 

Winners will make investments now in both the borrower experience and the back office manufacturing process. Those that do will extend the success the industry has enjoyed over the last year and lead the industry into the future. 

By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence

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