Two views were presented in the Sept. 11 issue of the American Banker that related to the impact of technology on mortgage lending. One view focused on the Internet and the other on the impact of automation on loan originations.
What surprised me about both viewpoints was that they were so narrow. In my opinion, what was missing was the fact that both the Internet and automation of many mortgage lending processes are creating a much greater opportunity to service and add value to customer relationships.
The most obvious and positive impact of automation and technology is that value is being shifted away from process completion to knowledge enhancement.
What this means to the customer is that the process of completing a mortgage transaction will become less burdensome. What it means to lenders is that they can focus their efforts on advising their customers rather than tracking down documents.
The Internet will allow for enhanced communications and exchange of information among all parties - borrower, lender, and third-party providers of data.
However, the two views previously expressed overlook an even greater consequence of the growing significance of the Internet and automation. The real breakthrough is that mortgage lending is becoming less constrained by the traditional functional model that has burdened the industry for years.
By taking a process view of the business, mortgage lenders do not need to be constrained by a product. Providers may begin to take advantage of core skills and processes, such as attracting customers, and apply them to a much broader product set.
As financial service providers begin to diversify, branding may be the key to attracting new customers and cross-selling. The Internet is already having an impact here. Just being aware of new products, capabilities, and ways to conduct business is having a profound impact on attracting new customers or selling to them in different ways.
My last point is that the automation of one delivery channel for one product, mortgages, is problematic. If this were done for each product, it would result in multiple channels, which are costly.
Breakthrough results only occur when old models are challenged and new possibilities emerge. A new perspective on the provision of mortgages enabled by the Internet and other technology is already creating many consumer benefits and providing new sources of revenue for a few forward- looking entities. Let the others beware.
Mr. Neckopulos is an associate partner in the financial services strategy practice of Anderson Consulting in Irvine, Calif.
