Time to check your leaky faucets!

In early 2022, my wife and I noticed a slight drip in the kitchen sink that progressively worsened. We quickly discovered that if we adjusted the lever just right, the drip would subside for a while. Right before the holidays, we had an issue with our water heater that wasn’t so livable, so we called an expert. After the plumber finished up with our hot water tank, we asked him to check our sink. In 5 minutes, he fixed the problem that had inconvenienced us for months! We had become so used to our workaround that we didn’t even realize how much time we spent in frustration trying to get the faucet handle just right (let alone double checking it all hours of the day and night) when we could have resolved the issue in just a few minutes of effort from an expert!

Sometimes, our workarounds are only efficient in our minds. They may save us time or a few dollars upfront, but do they save us anything in the long run? In my case, the answer was a resounding ‘no’.

In our professional lives, we’re trained to seek out our solutions for the ‘leaky faucets’ and typically only bring in an expert when we encounter a major problem that we can’t live with. For credit unions, the ‘water heater’ problems are typically the front office, as they live and die by the member experience. Having the right technology and interface (along with a myriad of other things) tends to be the core focus when it comes to investing in process and technology improvements.

Where are the ‘leaky faucets’ usually located? The back office. Temporary workarounds are created and then become standard practice; these workarounds are largely unknown to the broader organization, time-consuming, and surprisingly easy to correct. They add up and lead to frustrations and inefficiencies, just like my family experienced with our sink. I recently sat down with Mike Lawson of CU Broadcast and John Wyatt, CIO of Apple Federal Credit Union, to discuss the value of a back-office assessment.

You can check out a clip of that conversation here:

To see the entire segment, click here (just scroll down to the bottom of the page). I enjoyed speaking with Mike and John and encourage everyone in the credit union arena to subscribe to CU Broadcast if you haven’t already – it’s a great show, and one I’ve enjoyed for years.

So, when is the last time you checked your faucets? We’d love to hear from you – reach out to me if you have questions or want to learn more about maximizing your back-office efficiency.

In reading about all the FinTech lenders that have been re-imagining the customer digital journey, if you were an outsider (or a PE investor? ), you’d be left thinking that the banks and credit unions were all customer-journey challenged elephants destined to lose customers. Elephants, who are sitting on their hands, even though they oftentimes have better rates. But this is far from true. “Online-oriented” banks and credit unions have an ever-strengthening hand that they are playing. They are providing their customers and members with the service they’re looking for while outrunning the fintech models by improving their customer experience, but also leveraging their sophisticated call center capabilities. Here are two examples:

My dear 80-year-old mother, my iPhone-using, cross-country skiing mother, recently got a talking to from her son about how much more interest she could garner by moving her savings from a local brick-and-mortar-focused bank into an online outfit. We found that her interest rate would go from 0.5% to 4.0% instantly – it adds up. Easy right? We fired up the iPad on Sunday morning and got her started in opening an account at one of the leading online banks that you’ve undoubtedly heard of. But no! She didn’t pass the onboarding identity check as they couldn’t verify her existence and would need to wait to hear from a rep. Crazy right? In my Gen X point of view, I was furious and impatient, “what do you mean it can’t be done instantaneously?!”. Then again, I should have tempered this with the understanding that she hasn’t needed consumer credit since the 80s. Much to my surprise, come Monday after I had returned home contemplating how hard it would be to act as ‘remote support’ for her ongoing digital journey, my mom was called by “a nice woman,” who walked her through the process and <boom> the online bank now has a significant, sticky, new online customer that is quite pleased with their rates.

What would a fintech mantra have called for? I’d bet a paycheck they’d respond only to those that made it through the digital native process. Before you think of that as ‘the cream of the crop strategy’, what percentage of society is that really? And does that percentage have as much money to put into an online savings account as the older generation? On the surface, her new online bank seems to care more about her making a bit of money on her money than… dare I say it… her hometown bank. By combining technology and training staff on end-to-end processes (this was not that call center agent’s first rodeo), the elephant can dance. The whole experience was a real surprise to me.

In another example, at a large online-oriented credit union client of ours, I got a front-row seat of the customer journey from the other side of the fence. I had the pleasure of meeting the heads of open banking, customer journey, and customer interaction at a holiday luncheon. Those groups don’t all talk together about end-to-end journeys that often. While open banking at first is perceived as “allowing our members to provide access to their personal financial data to others,” it is now being understood as an opportunity to initiate the customer journey. A journey to keep a member from being pulled into the fintech journey, where the rate is much worse than the credit union can provide! In this case, the online credit union is working to establish a small set of predictive features from the open banking request that will trigger outreach to the member, highlighting the basics of the credit union’s competing offer (as in we think you are shopping for a personal loan; our rates are highly competitive, and we can approve you in 5 minutes…). It’s not hard to imagine the Elephant moving to a more sophisticated dance (let’s call it a ‘cha-cha-cha’) by running a soft inquiry and providing a firm offer of credit, but I suggest that a timely, but basic, triggered communication will start to become very common. And, in most cases, it’s good enough.

Execution is the hardest part of any plan, and the team at CC Pace excels at helping to turn strategy into results. Give us a call or reach out to me on LinkedIn to explore the ways we can help you tap into a more efficient customer journey process. We know your elephant can dance, and we can help.

How do you move forward as an organization to achieve your vision? What’s working well? What’s holding you back or bogging things down? As a mortgage consultant who’s worked in the industry for years, I hear these questions all the time from organizational leaders. And there is help! One tool that’s very effective in helping you answer these challenging questions is an Operational Assessment. Operational Assessments are a pulse check for your business. Every company can benefit from an operational assessment; it provides an open, honest, and objective viewpoint of your business’s current processes, procedures, technology, people, and risks. And once you have this information, you’ll be able to create a plan and chart a path for the future.

So how do you get started on an operational assessment? Where do you find the information? Again, the operational assessment is to provide a checkup of your organization. There is no better way to get to the truth than talking with your employees and clients.

Most Operational Assessments include the following components, so you’ll want to frame your questions and surveys around these business areas.

So, what’s the best approach to collecting data? Staff interviews and ride-a-longs are a great option, and it is through these conversations with employees that you’ll gather a lot of information to complete the assessment. Listen carefully. Because without question, you’ll gain tremendous insight into the formal and informal processes and cultural norms that drive the business. For example, does the current technology effectively support the business? Does it help employees complete their jobs, or is it a constant issue? Are leaders delivering a consistent message, uniting around common goals and direction? In short, are we all together in the boat rowing in the same direction? People are the core of the business, and it’s important to understand their feedback, comments, perspectives, and observations. Through open dialogue, you’ll uncover things that are not always seen, like workarounds, completing work in a strange order, missing key items that could make reporting better, outdated policies and procedures, etc.

For external customers, consider using interviews, or to reach a broader audience, surveys are also very effective. Do customers have a positive experience when engaging with your organization? Are they satisfied with the business relationships? You’ll want to incorporate feedback from closed and unclosed loan clients, as well as your realtor/builder partners.

An operational assessment is only as good as the honest and open feedback received, a clear view into the company’s current operations, AND leadership that is willing to listen, then adjust and apply any apt learnings.

This blog is a very brief overview of an operational assessment that could help you objectively determine the status of your organization. Once you can see things with complete transparency, it can help define intentional growth or organizational change steps. Once you know where you are, THAT VALUE can help you get where you want to be.

I am a mortgage baby, and proud of it!

That is what I was called, before I even started my journey in the mortgage business, a mortgage baby.

I officially began getting a paycheck in mortgage banking in early 1991, although I knew about mortgages way before I entered the business. I am excited to have been able to evolve and grow into a Director, Mortgage Practice for CC Pace Systems, Inc. I hope to share my knowledge, wisdom, and lesson learned with our many clients.

My mom and dad were both originally in the Savings and Loan business in the early 1970s. In the late 1970s, my dad (Gerry Self) transitioned to being a Mortgage Insurance Sales Representative. My mom (Sylvia Burnett, formerly Sylvia Self) began working for a mortgage banking firm and she had a side gig, underwriting loans for the local HUD (Housing and Urban Development) office, way before Direct Endorsement. What I remember about the early days of that, was that my dad was always on the road and my mom worked a full day, then would bring home boxes of files from HUD and after getting us all nestled into our beds, she would underwrite loans.

Then in 1984, my parents went to work together at the same company. My dad was the Branch Manager, and my mom was the Operations Manager. They opened the Killeen branch, then we moved to San Antonio, and they opened that branch. I would work many hot Texas summer days from 1984-1986 at that company. I did some light clerical work, like answering the phones, filing, typing, organizing, fetching. Lots of fetching.

What I remember from that was that there were no fax machines and certainly no computers. There were typewriters, IBM Selectric III’s, everywhere. The FHA (Federal Housing Administration) forms were multi-page with all sorts of colors with carbon paper in between. There was liquid paper in several colors; Acco punchers and fasteners; file folders and file cabinets; staplers and staple pullers; three-hole punchers; blue pens and red pens. The blue pens were so you could tell it was an original signature. The red pens were used by the underwriters, who, I assumed like teachers, graded your work.

Paper and manual everything was king. Automation was not even a sparkle in anyone’s eyes.

In November of 1986, I turned 16. Over the Thanksgiving holiday, while we were in Lubbock, TX with the grandparents, my parents bought me a 1981 Buick Skylark for $2,000. I got to drive it all the way back to San Antonio, it was awesome. After unpacking from our trip and settling back in, one day after school my mom came to me. She sat me down and very sternly let me know that it was time to find a job. So off I went to the nearest Albertsons, turned in my application, and was interviewed. I was hired that day and I started the very next day. I came home and let my parents know and my mother was flabbergasted, thinking that it would take me more than a few hours to land a job. So, in December of 1986, I started my job as a Courtesy Clerk (Bagger) at Albertsons on the corner of San Pedro and Thousand Oaks and left the mortgage world behind me. Or so I thought…

Follow Greg’s journey in part 2 of the series here!

I sincerely hope that you’ve been enjoying Mike Gordon’s recent posts on the changing landscape of banking in the digital world. (If you missed them, please bookmark this post and click this link to read them before continuing any further.) Mike has done a great job of outlining many of the macro-level changes afoot among the banking industry leaders, the innovators and the smaller local lenders as they respond to customer demands and competitive pressures in a time of rapid acceleration of mobile computing and personalization of services available in finance. Mike deftly explores how the responses may vary by institutional types along with his insights as to why the digital approach most often aligns with the customer population that typically defines their respective markets.

I recently ran across an excellent thought piece from Alex Johnson and Darryl Knopp of FICO, based on a session they presented (virtually, of course) at an American Banker’s Digital Banking 2020 conference in December and was struck by how well it complemented Mike’s posts at a more tactical and granular level. The executive summary of their session, entitled “The 11 Commandments of Digital Banking”, can be accessed here (Download Executive Summary). I think that you will agree that Alex and Darryl’s “commandments” are well reasoned and thought provoking in the way that they articulate the customer experience requisites of our times, well punctuated with humor and the obligatory TikTok reference our pop culture demands. Coupled with Mike Gordon’s overviews of the current landscape, these pieces give us a lot to think about how well we are doing with regard to transforming our own businesses to better serve our customers and keep up with the times.

Please drop in a comment to let us know how your own digital transformation is going. We would love to hear from you.

In my previous blog, I highlighted that different banking “personas” have differing goals with respect to digital banking. The large, national financial institutions envision digital banking as being a fundamental competitive differentiator they need to continuously build upon. The smaller community banks and credit unions are looking to continue to provide an attractive, local alternative like they have done in the past, while meeting the growing digital requirements within their budget constraints. Meanwhile, new, online-only entrants are making a bet that their future banking clientele do not require any physical presence, particularly in the millennial market.

This blog delves deeper into the strategies and tactics being deployed by the first group, the large national players. With the financial wherewithal to invest in new technology, these institutions strive to provide the widest array of banking options and features to attract and retain customers, while also improving efficiencies within their companies.

As early adopters of online and mobile banking services, the national banking institutions enjoyed an advantage over their smaller competitors when the pandemic hit and physical access to bank branches became limited. Not surprisingly, the J.D Power 2020 Retail Banking Satisfaction Study found that these large financial institutions had both a greater penetration of digital customers and a higher customer satisfaction index of their customers, using more advanced online and mobile capabilities to achieve this advantage while increasing revenues, managing costs and improving service.

Many large national banks have increased revenues and grown market share largely by focusing on customer experience as an essential component in attracting clients from large and small competitors alike. By increasingly using human-centered design techniques and mobile banking services to tailor technology to the needs of the customer base being served, these banks have rolled out highly effective online and mobile platforms that leave customers feeling good about their experience. This approach often includes faster onboarding, simplified payment processing, and easier access to account and transaction information with digital signatures and mobile check deposits reducing the need to come to a branch to create a new account or conduct many common transactions.

Reducing foot traffic into branches has not reduced the ability to grow revenues by selling more products, however, as the national players have increasingly leveraged artificial intelligence to mine their data to determine which customers are likely candidates to purchase certain products, and then following up with targeted online marketing campaigns to promote those products and make signing up quick and easy via online banking.

Despite the obvious technology costs of deploying digital banking capabilities, the large players have found ways to use digital banking to reduce two of their largest expenditures: labor costs and fraud losses. Like most companies, the largest expense for a bank is their human capital costs. Technology has successfully enabled the large financial institutions to serve more customers with fewer employees.

Using robotic process automation, more and more activities previously performed manually by bank staff are now computerized. Chatbots and Voice Assistants are also being used to allow customers to get answers to questions or to process certain transactions with less need for interaction with a human employee. As an example of the magnitude of this labor cost reduction, in an interview with CNBC in October, 2020 Brian Moynihan, CEO of Bank of America (BofA), stated that through the adoption of technology, BofA has reduced its workforce in the past decade from 288,000 people to 204,000, a 29% decrease.

While the increased use of digital banking has led to efficiency in bank operations, it has also increased the risk for bank fraud. Online and mobile banking provide new gateways for criminals to defraud businesses and consumers. Fortunately, artificial intelligence and machine learning platforms have provided a means to combat these criminal activities and reduce the losses associated with bank fraud. As the sophistication of these systems have grown, they have become more equipped to recognize emerging trends and behaviors to identify additional transactions of concern. In the past, one common mechanism to mitigate risk of a potentially fraudulent transaction was to simply deny an application. Today, using artificial intelligence, fraud losses are being mitigated with less impact to approval rates.

Finally, with respect to improving service, a growing trend particularly popular among younger customers is the concept of digital self-service. Self-service is the ability for customers to get answers to questions and process transactions without the need to wait for a service representative to help them. According to Salesforce’s “State of the Connected Customer”, 59% of consumers and 71% of business buyers say self-service availability positively impacts their loyalty.

Features like Frequently Asked Questions (FAQs), videos about banking products, or financially-related knowledge articles have been added to bank websites and mobile apps as part of this self-service. Combined with Chatbots and Voice Assistants mentioned above, customers are now getting the answers they are looking for much quicker than they were when waiting for a customer service representative on the phone.

These digital banking technology investments have provided the large financial institutions a strategic advantage over their smaller, less well-healed competitors. So, what are these community banks and credit unions doing to counter this advantage? Stay tuned for my next blog in this series.

We recently conducted a (sold out!) webinar on the LIBOR Transition, driven by the NY DFS sending a letter to over 1,000 companies that they regulate Board of Directors, with a response due on March 23, 2020.

The first question we received in response to the webinar was “you guys use a lot of acronyms, can you explain what it means, please?” And it’s true, we do use a lot of terms, so we put together a LIBOR transition cheat sheet (a Glossary) to explain not only what each acronym means, but why it is important in a LIBOR transition context.

Some facts about LIBOR:

LIBOR has been in use since the 1970’s and is well understood by the markets and regulators.
Many loans use LIBOR as an index rate, especially mortgages and student loans.
However, dollar volume of LIBOR based contracts, futures, options, or other types of derivatives is far greater than its use in loans.
Although people talk about it as if it were a single number, it actually has its own “Term Structure” (see our glossary) with 7 different rates and its own yield curve. Having a Term Structure is a great attribute for a Reference Rate to have, and most Alternative Replacement Rates do not have that, at least not yet.
The Financial Conduct Authority (FCA, below) that oversees the publication of LIBOR decided in 2017 to not compel any bank to contribute to the LIBOR process after December 31, 2021. This means it is very unlikely that banks will participate after this date, and LIBOR will cease to be credible if it exists at all.
Liquid markets require many participants. Therefore, regulators and associations are issuing Replacement Guidance to move participants to a new market. In the US, the ARRC (below) is guiding markets towards SOFR (below).

Here are the first four LIBOR-related acronyms you’ll hear us mention when we talk about the transformation. The full list of terms can be found here. It will be updated on a regular basis.

[i] https://en.wikipedia.org/wiki/SOFR
[ii] https://www.newyorkfed.org/arrc

The new URLA is coming. But the status report, for July 2019, is decidedly Red.

Warning signs regarding the immensity of the forthcoming changes have been out for well over a year, yet it seems some lenders are just starting to realize the size and implications of the coming changes related to the new loan application – the Uniform Residential Loan Application (URLA, aka 1003 or form 66). This is the first of a short series of blogs exploring the benefits and challenges that lie ahead.

The URLA is undergoing a total redesign for the first time in 30 years and that is driving major changes in four areas:

The application itself – its form, data elements, organization and fundamental operation
Its corresponding data file, the Uniform Loan Application Dataset (ULAD)
The agencies’ automated underwriting systems (DU, Fannie Mae’s Desktop Underwriter and LP, Freddie Mac’s Loan Prospector) submission, interfaces and files
The retirement (at least not keeping current) of the Fannie Mae DU3.2 file, which has long been the industry de facto standard for transferring data.

The optional date is coming soon – July 1, 2019 – and the required date is February 1, 2020 – not very far away for a truly major change.

When the subject of the new ULRA came up at the recent National Advocacy Conference, a gentleman sitting at my table said, “My vendor is taking care of it.” When he didn’t smile and the rest of us figured out that he was serious, the branch manager and the lawyer at my table both asked him “You mean your vendor sets your policy for how to fill out the language preference and whether you let the MLO do that instead of the borrower?”

I saw two other issues myself, including “Which vendor?” and “Are all your counterparties ready? Does your entire process work end-to-end?”

On the issue of leaving things to your vendor, even small lenders are likely to be dealing with two or more vendors who not only have to be ready, their systems have to be tested together to make sure that your process works.

Below is a simplified snippet taken from CC Pace’s Reference Architecture, showing internal interfaces that are affected by the new URLA:

That’s a lot of moving parts undergoing substantial change that need to continue to work together. Let’s look at things from the perspective of relatively common test cases. It seems reasonable to expect that a POS submission to DU and an LOS submission to DU will both work. But in an equally common, but decidedly more complex scenario, when you take the application on the POS, transfer the loan to the LOS, where you rerun DU and then request a set of documents from your doc vendor, it’s not hard to imagine that initially something will break down, simply based off of different assumptions that were made.

On the issue of counterparty readiness, the reference architecture reveals even more counterparties and vendors that have to be ready and that you will have to test your process with:

But wait, there’s more! As far as the industry is concerned, not only do you and your counterparties have to be ready, but the entire ecosystem has to be ready, end-to-end. And the status for that is decidedly red.

Take the previous difficult test case and now extend it to a common industry chain. A broker starts the application, it closes with a mortgage banker who then sells it to a correspondent investor, who now runs Early Check or LQA on it, purchases it from the mortgage bank and then delivers it to Fannie or Freddie. It is known that this will not all work in July 2019.

Here is what I gleaned from the MBA ResTech call from May 16^th, 2019:

Many individual vendors appear to be ready – but what that means is that they are ready to be tested in conjunction with other counterparties in the ecosystem
Not all components necessary for an agency correspondent transaction are ready
Correspondent Purchasers are starting to issue guidance that they will not purchase loans on the new URLA until 2020

It is CC Pace’s recommendation that every organization be extremely active monitoring the status of the new URLA both within and outside of their company; it is impossible that “our vendor is taking care of it all” is the right answer. This July through February represents a significant and much needed test period, not just for the systems and your process, but also for your compliance and training.

Some Correspondent Purchasers are issuing their own guidance on the matter. Have you?

CC Pace recently completed an interesting project for a mortgage lender who had just done an acquisition. The project questioned a fundamental assumption of loan pricing and whether the existing approach was compliant or not. One entity had “branch” pricing (as do many lenders), where the price quoted to the borrower is based on the branch rate sheet of the loan officer that the borrower works with. The second entity, however, had pricing based on where the property was located (also a common practice). Compliance recognized that these two different methodologies could result in disparate pricing to the consumer, potentially leading to fair lending violations.

Having been in the industry for a long time, the notation of pricing based on the loan officer’s rate sheet didn’t seem unusual to me. We have implemented this model many times, going back to the 1980’s. It was so ingrained that I had never really thought about it. But this project challenged my assumptions and changed my way of thinking—for the better.

In retrospect, under the “right” (wrong?) use cases the lender could have faced fair lending penalties even before the acquisition. For example, if a borrower was looking for loan for a second home and had gotten quotes from both their local branch and from the branch in the property’s geography, those quotes could easily have been different.

Our client’s Compliance group recommended moving everyone to the geographic model – pricing based on where the property is located, not based on where the loan officer is located. And pricing should include “junk” fees, which were determined by the Sales organization, whereas Secondary determined rates & points. CC Pace’s role was to lead this transition, a major shift for a lender who hadn’t re-thought their pricing in many years.

Redesigning processes that were deeply ingrained in the organization and systems made for an interesting project. How do you define the geographies? Zip code level is too small to be compliant; MSA is better. But using every MSA in your footprint may be too many geographies to maintain. How do you align the “junk” fees with the geography and with the organization? Who actually sets the branch rates? What updates do you need to make to your rate sheet? What new training do you need to do?

Much of the elapsed time for the project was spent in the conceptual design and getting it approved by the stakeholders and Compliance. However, the bulk of the man-hours were spent updating and testing the pricing engine and loan origination system for both pricing and fees, and then testing the systems across all the different use cases (retail, call center, digital). There was also a need for some organizational realignment of responsibilities. Surprisingly, however, the re-training of loan officers turned out not to be very difficult.

I came away from this experience realizing that this was an important project that many lenders may need to consider, even if they are not doing an acquisition.

How does your organization price loans?

Although Charles Darwin adopted the term “Survival of the Fittest” from Herbert Spencer to describe his theory of evolution, it is easy to misunderstand if you don’t have context for what “fittest” means. Darwin’s theory of natural selection showed how, in the long run, organisms that could adapt to changes in their environment out-survived organisms that were highly efficient in the current environment but rigid, and slow to adapt.

How is this relevant to loan origination? Few industries exist in an environment that changes as frequently as that of mortgage banking.

Many lenders with what they believe to be a highly-efficient process seek to memorialize that process in their loan origination systems (LOS) through customization – only to find that when they need to upgrade their systems, doing so is time-consuming and difficult.

Too frequently lenders look at the newest release from their LOS vendor and think “how do I get there from here?” How should lenders be thinking about bringing their customizations forward into their new release?

“This porridge is too hot. This Porridge is too cold.” – Goldilocks

Previously, many lenders defined the ideal LOS as one that was customized to their way of doing business – what was the most efficient at the time. However, the combination of FinTech, new POS technology, the new ULRA, and the constant pace of change are forcing many lenders to take major system upgrades, and to re-think their LOS customization strategy.

Even with some (temporary) regulatory relief, the overall pace of change is speeding up. Many LOS and POS vendors now expect to make a significant release each year, and to continue on that pace, with the requirement that lenders adopt the new releases faster. But that is OK, because the business case for their adoption is growing stronger. Being able to take new releases quickly and easily is the new efficiency.

The best strategy is to make your organization (process, technology and people) as adaptable as possible. How does a lender do that? Although here at CC Pace we help lenders with all three aspects, for the sake of this blog, we will focus on just one: the technology, in this case the LOS.

Typically, the hardest part of taking an upgrade is making sure the customizations survive the transition and associated regression testing.

Therefore, before doing an upgrade, organizations should look at their customizations and determine “given what I know now, and how the package operates out of the box in the latest release, would I make this customization again?”

“Ahhh, this porridge is just right” – Goldilocks

Some Valid Reasons for Customization

Internal interfaces
Something particular to your business that is not handled in the package, e.g., a custom funding module
Support for a different regulatory interpretation (But work hard to see if the vendor’s interpretation isn’t actually acceptable.)

Some Invalid Reasons for Customization

Low-level users on the project demand a change without regard for the long-term business case (that includes the cost of making and then maintaining the customization). Sometimes even if the change is better, it might not be worth it.
Exception processing – a mature system (which is typically the type being replaced) will likely have grown to handle exceptions. However, I have seen too many cases where people forget that they are processing exceptions – and let “the rules” pass them by. Focus on getting the straight through process to work.

There is a continuum between a strict “No Customization” policy at one end, and the previous “We bought this system to be able to customize it, let’s do it” at the other.

Goldilocks

An organization should strive for “Goldilocks,” that sweet spot where you implement important customizations, but the rational for the change is made by management, after detailed discussions with the vendor, and performed in a way as to have lower maintenance costs.

If you are one of these lenders with highly customized systems, what is your upgrade strategy?

As digitization of the mortgage process (finally) gains steam, lenders need to start looking towards the future when everyone is digital. What will it mean for the industry?

An aspect of the digital process that is often overlooked is that an increase in digitization is equal to a decrease in interpersonal connectivity. Insofar as that interpersonal connectivity is what binds a borrower to a loan office or lender, what will provide that binding compound in the future? How will you make your brand stand out? What will make a borrower come to you versus the next lender in their google search?

Quicken took a very forward thinking, positive step when they introduced Rocket Mortgage to a huge audience via their super bowl ads. Many people now equate a digital or online experience with “Rocket Mortgage”, similar to how a copier is called a Xerox machine or a tissue a Kleenex. Only time will tell if that sticks, but it is definitely a presence in the market today that everyone has felt.

The commoditization and loss of a personal interchange is not new. People used to visit a specific gas station because they trusted a brand or liked “Jimmy” and thought he was a nice guy that always did such a great job cleaning your windows (remember when that happened!?!). Consumers developed a personal relationship that drove what gas station they visited most frequently. Today, almost all gas stations require little to no interaction with a person, with their credit card machines at the self-serve pumps (except in states like NJ, but that’s another story). People most often simply buy based on price and convenience. If you asked people what brand gas they bought most recently, many would not know the answer. Today, the competitive landscape for gas stations is therefore very much price based. The competition is made more intense with the sharing of data via apps like GasBuddy, so people can easily compare prices in their area and pick their vendor for the next fill-up.

With digitization and the increasing popularity and use of Day 1 Certainty and Loan Advisor Suite functionality accelerating the process, getting a mortgage from Lender A or Lender B will not differ much at all for most borrowers. They will select based on price and convenience. Depending on the results of their google search, it may end up being more of the latter than the former. Standing out amidst commoditization will then be critical to survival. How will you be found by a potential borrower? Why should they apply with you versus another lender?

We only have to take a look around to know that while great strides have been made providing technology and applications to help customers with their everyday lives, there is still a long way to go. I don’t mean until life is fully automated, it is more about the refinement needed to what is in use to fully serve its purpose and the public.

Issues customers encounter can be anything from a bifurcated process still needing a combination of personal touch and automation, to technology geared toward some but not all customers, to a limited-scope solution that only addresses part of the customer’s needs (and wants). While the assumption is that it is always quicker to do something online, there are times where that is a fallacy.

Many organizations are realizing there is a gap in their offerings and some have created customer experience (CXP) officers or departments to specifically address the customer experience. The goal for CXP is specifically to “delight” the customer by designing interactions that places the customer’s needs first.

These CXP departments are still nascent in many organizations, but the concept has gained a foothold and momentum. Their focus goes beyond customer service or application usability, they are looking at any and every interaction the customer may have with the organization, across channels, technology and throughout the entire process for their various customer categories using journey maps as a way of mapping out the interactions. In a recent American Banker article ‘Where is everyone going’, Rebecca Wooters, managing director and head of global cards customer experience digital and journey strategy at Citigroup, was quoted saying “Each journey has a starting point or multiple starting points and an intended outcome… What is everything happening in between those two spots, and are we doing what we need to do for the customer to provide a seamless, frictionless experience?”

Allowing a customer to begin a process at the branch, transition to a mobile application to enter their information, and then reach out to the customer support line to continue the process without having to explain their entire situation, re-enter data, or any other duplicative effort would be a nirvana of sort for many organizations. That seamless experience is what organizations strive for but have yet to achieve in the vast majority of cases. That is a world where the tools and information the customer wants and needs are provided, how they want it and when they need it. This foundation will very likely encourage customers to be more independent through self-service transactions, as they will have confidence that they get the answers they need or support they want without wasting time and effort needing duplicative explanations or repetitive data entry.

Does your company have a Customer Experience Division? What changes have been introduced due to this group’s activities? We would love to hear from you!

Can you imagine a world without engineering? It’s a tougher question to answer than you might think. Many people do not actually know the extent to which we rely on engineering for our daily lives to function, and the amount of work that has gone into it by different types of engineers.

The discipline of engineering is one of the oldest, arguably as old as civilization itself. The first engineers were those who developed the lever, the pulley and the inclined plane. Egyptian engineers designed and built the Pyramids, and Roman engineers conceptualized the famous aqueducts. Today, engineering covers a broad range of disciplines, all devoted to keeping the “engine” running — a world without engineering would soon come to a standstill.

In a recent conversation, I answered the usual “What does CC Pace do?” question with my standard response regarding our services, to which she replied, “Oh, you’re process engineers!” Her response was compact, narrowly focused, and remarkably spot on. With people processes and systems processes at the heart of much of what we at CC Pace do, yes, we are process engineers, yet it had never occurred to me to describe us as such.

Quoting liberally from Wikipedia, process engineering focuses on the design, operation, control and optimization of a series of interrelated tasks that, together, transform the needs of the customer into value-added components and outputs. Systems engineering is a close corollary activity that brings interdisciplinary thinking to focus on how to design and manage complex systems, beginning with discovering the real problems that need to be resolved and finding solution to them. That’s what we do here at CC Pace in a nutshell.

Some folks make the mistake of thinking business processes are in place to only ensure internal controls remain strong and to make people accountable for what they are doing. In fact, business processes constitute all the activities your company engages in—using people, technology, and information—to carry out its mission, measure performance, serve customers, and address the inevitable challenges that arise while doing so. Processes determine the effectiveness and efficiency of your company’s operations, the quality of your customers’ experience and ultimately, your organization’s financial success.

At CC Pace, we pride ourselves in achieving organizational excellence by being the industry leader in business process and technology engineering. We are dedicated to driving innovation and delivering exceptional quality in everything we do. As systems and process engineers, we help our clients streamline, standardize and improve their processes to retain a competitive edge. You see problems; we see solutions.

Almost everywhere we look, we see the signs of a rapidly progressing transformation to an online, digital future, in the way we communicate, consume entertainment, shop and manage our finances. Very surely more and more aspects of our daily lives are changing at a clip unlike anything we’ve seen before. Is it possible the banking and mortgage industries are immune to this transformation? Absolutely not.

But disturbingly, a survey by Mindmatters Technologies Inc., a firm that specializes in helping clients maximize innovation in new product development, found that 81% of US businesses do not have the resources needed to fully pursue the innovations and new ideas capable of keeping their companies ahead in a competitive marketplace. Polling from CC Pace’s own recent survey (Mortgage Banking & Technology: Lenders’ Perspective) found that thus far, fully 80% of lenders have failed to take substantive steps towards creating the capability of offering their customers a truly end-to-end digital mortgage experience.

Banks and lenders continue to find themselves trapped by mature, complex processes, products, and systems, and the cost of breaking these chains to enter the digital age will only continue to mount. Further, lenders exhibit little confidence that their software providers are doing enough to help them with the transition. Evidence of this concern is validated in our recent survey where we found that 64% of lenders today continue to be “unhappy with” or “resigned to” their current technology provider.

Even as many in the banking industry struggle to overcome inertia in their move towards digital, they are feeling threatened by “outsiders” who are not as bound by the past, thus are able to more freely design, build, and launch solutions that offer cutting edge technology and processes that better meet the demands of today’s consumer. Whether motivated by fear of survival or the desire to be an industry leader, one thing is for sure: lenders can ill afford to sit idly by, waiting for the future to arrive.

Consequently, lenders are increasingly deciding to take the future into their own hands. For some, that means moving away from traditional vendor-supported platforms in favor of developing technology in-house, but such moves are not for the faint-hearted. Many more are finding that the most cost-effective (and risk averse) strategy for moving into the digital age is to begin building on top of their existing platforms to effectively cross the chasm. Bolting new capabilities onto legacy systems from among a host of FinTech upstarts, coupled with adopting aggressive process reengineering and business transformation projects can allow them to attain new benchmarks of success.

With many lenders lacking the time and resources to sustain a complete technology overhaul and engage in an end-to-end business transformation, often they turn to third-parties, including CC Pace, to help pave their way to success in the digital age. Employing innovative ideas, judiciously selected technology additions, and a well thought out approach to reengineering can allow almost any lender to successfully reposition themselves to attain their digital transformation goals.

I’ve always said, “it all comes down to execution”. A key component to successful execution is knowing that successful process reengineering is less of an IT effort and more of a strategic business design project. For lenders to catapult themselves successfully across the chasm into the digital age, it will require a balanced approach of taking the future into their own hands, designing a realistic roadmap, finding the right partner to work with, and executing flawlessly. You see problems; we at CC Pace see solutions.

The Financial Services Team at CC Pace is very proud to announce the posting of a new white paper, which is based on the results of a recent industry survey. The senior consultants in our Mortgage Practice periodically reach out to a broad cross-section of the industry to gather direct input on the mood in the marketplace, current trends, pain points, technology innovations and more. The results from a survey we conducted in late summer can be found in “Mortgage Banking & Technology: Lenders’ Perspective”.

In this white paper, you will find lender input on a broad array of topics, including the competing priorities in the current market, the role of technology in competitive advantage, lender satisfaction with current technology and current progress toward a digital mortgage. One of the things we at CC Pace like to think distinguishes our survey results from others in the industry is our approach toward capturing a detailed, open dialog with our participating lenders. While the white paper certainly includes numerous charts quantifying the various positions the participants have on an array of topics, it also includes a wealth of insight in the form of direct quotes from lenders (albeit provided with anonymity, as per our agreement with the participants) on many issues. We hope you will agree that our open dialog approach makes our industry reports compelling reading, full of insight and perspective.

We hope you will enjoy our latest white paper and the view put forth by our participating lenders. Please share your thoughts with us, both on the paper itself and on topics you would like to see us cover in a future survey. And please let us know if you would like to be included in our next market survey, currently targeted for the first quarter of 2018.

With Star Trek: Discovery’s television debut rapidly approaching, I can’t help but reflect on the many valuable lessons on project management I took away from the original series, Star Trek, and its successor, Star Trek: the Next Generation. Those two TV series counted on the strengths of their ships’ captains, James T. Kirk and Jean-Luc Picard, respectively, not only to help entertain viewers, but to provide fascinating insights into the characteristics of leadership. In so doing, the shows created timeless archetypes of starkly contrasting project management styles.

Kirk and Picard both had the title “Captain,” yet could not have been more different. In project terms, both series featured a Starship Captain operating as Project Manager, Project Sponsor and Project Governance all rolled into one. Yet despite common responsibilities, they were very different in how they carried them out, each with different strengths and weaknesses; one would often succeed in roles where the other would fail, and vice versa. Each episode was like a project, but on the show, thanks to their writers, each ship’s captain seemed to always get a “project” that they were well-suited for. But that only happens in real life if someone makes it happen, and most real-life projects don’t have writers working on the scripts.

Kirk and Picard were polar opposites in management style in many ways, and most people involved with project execution have common traits with each. Suppose you are like one of them – are you a Kirk or a Picard? – what should you do to maximize your strengths and minimize your weaknesses? Suppose one is on your project – how do you ensure they are put to their best use? How should you be using them and what role should they play? What would they be good at and not so good at?

To get down to basics, the biggest difference between the two is Kirk is “hands on” versus Picard is “hands off.”

Kirk is clever and energetic. Because he is “hands on,” he is always part of the “away team” – the group of people who “beam down” to the whatever this week’s show is. The senior management here is typically the project team. When additional work was found, he did it himself, or with the existing team.

Picard is visionary and a delegator. He is more of a leader than a manager. He set objectives, made decisions and, obviously “hands off,” told Number One to “make it so.” Number One led the project team; Picard rarely went himself.

The best use of a Kirk is as a project manager with delegated authority on a short-term project with a fixed deadline, like a due diligence effort requiring the current situation to be assessed and a longer-term plan of action defined to address deficiencies. Kirk’s style and authority allows the team to move quickly; if additional tasks appear, Kirk will summon enough energy to get himself and the team through it. When decisions need to be made, he makes them. He will shine. But on a long-term project, if there is additional scope discovered (and there always is), Kirk will become a martyr, skipping vacations and asking his team to do the same. He will fail at some of his primary tasks – staffing the project properly, as example – and will inadvertently overestimate the current state of the project to his stakeholders, and underestimate the risks. Here again, it only works on TV.

The best use of Picard is as a project sponsor – he has the vision and needs you to implement it. The trick will be keeping him involved. On a short-term project he wouldn’t be your first choice for a PM – unless it was a subject that he cared deeply about – because he might delegate without being very involved.

If Number One got into trouble, but didn’t know it (e.g., the boiling frog parable: as the water heats up, the frog never notices until it is too late), Picard wouldn’t be providing enough oversight to know it either. Or, if his insight was needed, then there might be a delay while waiting for him to decide. On a long-term project, the project will need strong oversight to monitor progress and ensure engagement. That way Picard can keep the team focused on the right things. Picard could also be a PM on a long-term project like a process transformation. If there was a new requirement, it would never occur to him to try and do it himself – he would go to the sponsor to explain the tradeoffs of doing or skipping the new requirement, and get the right additional staff to do it. His management style is great for delegation and building a team, as well as developing the people on that team.

I know that both Kirk and Picard have their fans, and their project management skills both work on TV and in movies – but because there they always the type of project to work on that suits them, as the writer made it be so. In real life you need to be more flexible in how you use them, and apply the right one, or at least the right traits, to meet your business objective. Understanding this, and acting accordingly, may be as close to having a script writer for our projects as most of us will ever get.

A startling statistic that often gets overlooked is that 70% of projects world-wide fail. Each year, more than one trillion dollars are lost to failed projects. Most importantly, statistics show that these failures are frequently not the result of a lack of technical, hardware or software capabilities. Instead, these failures are typically due to a lack of adequate attention being paid to program management.

After seventeen years working in program management―implementing enterprise business strategies and technology solutions―I continue to be surprised by business leaders who misunderstand the differences between project management and program management, or simply think them to be two terms that refer to the same thing. Fact is, program management and project management are distinct but complementary disciplines, each equally important to ensuring the success of any large-scale initiative.

Let’s take just a minute to level-set the roles of both. Project management is responsible for managing the delivery of a ‘singular’ project, one that has defined start and end dates and is accompanied by a schedule with a pre-defined set of tasks that must be completed to ensure successful delivery. Project management is focused on ‘output’. Program management, on the other hand, takes a more holistic approach to leading and coordinating a ‘group’ of related projects to ensure successful business alignment and organizational end-to-end execution. A program doesn’t always have start and end dates, a pre-defined schedule or tasks to define delivery. Program management is primarily responsible for driving specific ‘outcomes’, such as ensuring the targeted ROI of an initiative is achieved. Put another way, program management is basically the ‘insurance policy’ of a project, the discipline needed to make sure all the right things are done to ensure the likelihood of success.

One analogy I often use to help differentiate the roles of a program manager and project manager is that of a restaurant. The executive chef (project manager) works within a defined budget, makes certain the kitchen is adequality staffed and creates the menu. The executive chef will provide defined tasks, processes, tools and strategies that ensure efficient and consistent delivery of meals. The meals are a tangible delivery (output). Overseeing the chef, the restaurant owner (program manager) will provide the executive chef with a budget to work from and will closely monitor the output of the kitchen. The owner will make sure each delivery and support role is adequately staffed, trained and paid (e.g., wait staff, hostess desk, dishwasher, bussers and bartender). The owner will also make certain all the details like music and lighting are in place and establish an appropriate ambiance. The owner will make sure the right tools are in place for flawless execution (such as utensils, glasses, napkins, water pitchers, pens and computers), while making sure expected standards and key performance indicators are being met to achieve overall profitability targets and a great end-to-end customer experience (outcomes). The restaurant owner’s primary responsibility is to focus on merging the tangibles with the intangibles to support successful business strategy execution.

When it comes to mortgage banking, an industry that’s known more than its fair share of failed implementations, it is critical that we start giving program management a greater priority, and ensuring that those commissioned to perform the role are equipped with the requisite skills and tools. Whether it’s adding a new imaging platform, bolting on new CRM or POS technology, or something as expansive as replacing an LOS, every enterprise initiative requires a project manager to be leading the implementation effort and a program manager focused on change management and roll-out. Consider the addition of an end-to-end imaging system. A program manager’s tool box should include strategies and frameworks to effectively manage the roadmap for each critical impact point. This would include things like training, updating policies and procedures, executing an internal change management strategy, synchronizing marketing communications, and updating key performance indicators. In some instances, the project may require staff analysis, skills assessments, compensation analysis and adjustments, or even right-sizing of the organization. All of these are key components of the program manager’s toolbox, and not generally covered within the role of a project manager.

Bringing this dialog back full-circle, program management helps reduce project failure rates by maintaining a holistic approach to guiding an organization’s successful adoption of the impending change, leaving the nuts and bolts of build-out in the hands of project management. By addressing the myriad of intangibles required to orchestrate successful adoption and acceptance of change by an organization’s personnel, program management also helps ensure that business strategies and projects remain in full alignment and ROI objectives are achievable. Preparing management and staff for the impending changes defuses fears that can send adoption off the rails and eases the transitions and realignment of resources and roles that often accompany larger initiatives.

In closing, it’s not surprising to find the lines between project and program management will easily get blurred. Our experience is that it is often difficult to identify a really good project manager that is proven capable of undertaking a large-scale effort, but even more so to find someone truly adept at managing all the moving parts of the program. This difficulty is even more apparent in organizations where undertaking significant projects is a relatively rare occurrence and these skills are simply not found among existing staff. While it may seem adequate to budget for a singular project manager and hope that the program elements will be attended, managed and executed, unfortunately, “hope” is not a viable strategy when it comes to business-critical initiatives. The assignment of a skilled program manager, whether sourced internally or externally, will ultimately prove to serve as an effective insurance policy to your project investment. In an industry where failure cannot be afforded, it’s time to stop gambling on project execution and begin implementing program management

As a continuation of our blog series on system selection, it’s time to discuss helpful tips to facilitate a successful product demonstration. The organization and management of the entire process requires upfront preparation. If you drive the process, your demo evaluations will be far more effective.

Demonstrations are one of the most critical components of the software selection process. Seeing a system in action can be a great learning experience. But not all demos are created equal. Let’s talk about how you can level the playing field. To make the most of everyone’s time, CC Pace recommends the following best practices for product evaluations.

Tip One – Keep your process manageable by evaluating no more than five systems. If you evaluate too many vendors, it becomes difficult to drill down deep enough into each offering. You will inevitably suffer from memory loss and start asking questions like, “which system was it that had that cool fee functionality that would be really helpful?”

Tip Two – For each software vendor, set a well thought out date and time for the on-site demo. Depending on your team’s travel schedule, try to space out the demos a few days apart so that you have time to prepare and properly analyze between sessions.

Tip Three – Logistics play a big role in understanding how a system looks and functions, so do your part to help your vendors present well. Whenever possible, arrange for a high-quality projector or large HD screen for the attendees in the room. Hard-wired internet connections are always better. There’s nothing worse than being told, “the screen issues are because of a resolution problem” or “it’s running slow because the air card only has one bar.” Providing these two items can easily remove doubts about external factors causing appearance and performance issues.

Tip Four – Involve the right people from your organization. It’s important to have executive sponsorship as well as hands-on managers involved to assess the software modules. This is also the best opportunity to get “buy-in” from all parts of your organization.

Tip Five – Be sure to head into these demonstrations knowing your key requirements. Visualize it as a day in the life of a loan and follow a natural progression from initial lead into funding. Jumping around causes confusion and can be difficult on the vendor.

Build a list of requirements based on the bulk of your business. Asking to see how the software handles the most complicated scenarios can send the demo down needless paths. No one wants to watch a sales person jump through a bunch of unnecessary hoops for a low-volume loan product.

If you highlight which functional capabilities are most important to your organization, the vendors can spend more time demonstrating those capabilities in their software. Communicate how you think their software can help. But be careful not to justify why something is done a certain way today, but rather focus on how it should be done in the future.

Tip Six – The easiest way to take control of the demo process is to draft demo scripts for your vendors. Start by identifying the ‘must-have’ processes that the software should automate. Don’t worry about seeing everything during this demo. Set the expectation that if the demo goes well, the vendor will likely be called back again for a deeper dive. Provide a brief description of each process and send it to the vendor participants so they can show how their software automates each process. The best vendor partners will have innovative ways to automate your processes, so give them a chance to show their approach.

As you watch the demos, keep track of how many screens are navigated to accomplish a specific task. The fewer clicks and screens, the better. Third-party integrations can significantly help with the data collection and approval process. Always have an open mind regarding different ways to accomplish tasks and don’t expect your new software to look or act just like your legacy system.

Simple scorecards should be completed immediately following each demonstration. This will make it easier to remember what you liked and disliked and prove invaluable when comparing all the systems side-by-side when your demos are complete.

One final suggestion: always request copies of the presentations. Not only will this help you remember what each system offers, it’s useful when the time comes to create presentations for senior management.

photo credit: http://www.freepik.com/free-vector/business-presentation_792712.htm Designed by Freepik

As Wall Street analysts predict smartphone sales will continue to level off due to varying levels of market saturation, does that actually mean smartphone utilization is set to follow? Is the smartphone honeymoon over? Is the saying ‘there is an app for that’ dead? Perhaps the sales of new smartphones are in fact tapering off, but I am a firm believer that ‘utilization’ is just getting started.

Since the turn of the Century, each new generation of trains, planes and automobiles continues to be enhanced in order to increase consumer satisfaction and society’s overall productivity. With each new generation they become faster, easier, and cheaper to run and maintain, and lighter, smaller and in many cases even more luxurious. Why should the smartphone be any different? It has revolutionized how we store, manage and transport information. In the short term, the smartphone has allowed people to immediately ditch the bulky briefcase loaded down with a calendar, address book, calculator, plane tickets, a newspaper and manila folders to that of just a handheld device which simply fits into a shirt pocket.

The invention of the smartphone is on par to that of the automobile. Society’s overall successful adoption of the smartphone has been in an effort to help increase one’s ‘quality of life’. With that said, it’s quickly becoming high noon in the world of business where the lack of an effective smartphone strategy for both customers and employees will likely seal the fate of said business. Most at risk may in fact be the financial services industry, given the volume of legacy systems built and now required to support some of the most comprehensive of services and investment products. The up and coming millennial generation has made it blatantly clear they will adopt those who have successfully adapted. Moving forward it’s incumbent on a business that their success, let alone their survival will be dependent on their smartphone e-strategy. So in reading the following article, it confirmed my belief that the smartphone generation is just getting started. Read more about it in Strategy+Business, “Radical Intimacy and the Smartphone”.

CC Pace remains committed to helping guide organizations in the development, deployment and adoption of their e-strategies.