Since the COVID-19 outbreak, the normal way of doing things is being redefined on a daily basis. Many financial experts consider this global pandemic to be a “black swan” event. From Nassim Taleb’s \”black swan” theory, the term refers to rare, unexpected events of large magnitude with potentially severe consequences. While predicting the future seems impossible, it is fair to say that COVID-19 precautions have forced consumers to adopt new habits, including how they purchase goods and services. This will have a significant impact on the mortgage banking industry moving forward.
In my opinion, as more people become comfortable with the convenience of online shopping, there will be no turning back. Take food shopping for example. For many consumers, what used to be a weekly, in-person ordeal has been replaced with easy online ordering from home and door-to-door delivery.
In the Forbes article, “How Will the Pandemic Change Consumer Behavior,” Kian Bakhtiari says, “For a long time, e-commerce has been eating away the heels of offline retail. Worldwide e-commerce sales hit $3.5 trillion in 2019, an increase of 18% from the year before. Yet, despite the rapid growth of e-commerce, it’s still a relatively small piece of the total pie (14%).”
He notes that even well-known brands such as Kraft Heinz and PepsiCo that traditionally sold through physical stores and third-party vendors are changing the way they distribute their goods. The lesson here for mortgage lenders is that brick-and-mortar is not the only way to sell goods and services. Consumers are shifting to mobile and digital channels faster than sellers, leaving behind companies that haven’t made the transition.
Strategies for Long-Term Success
What does all this mean for lenders and originators? In the current marketplace, historically low refinance rates have prompted a wave of business. However, once interest rates inevitably rise, consumers will not tolerate poor service, long closing times, and unreturned phone calls. Consumers expect a higher level of service from retailers. Lenders that can deliver a better customer experience will have an advantage over the competition.
According to a recent Lending Tree study, three in ten homebuyers said they would purchase a home without physically touring it in person. The fact that prospects would forego “kicking the tires” on one of the the largest investments most people make in a lifetime shows just how prevalent drones and virtual tours have become in our industry.
Changes are coming at lenders and their originators fast and furious with no signs of slowing down anytime soon. Not only do lenders need to automate their back office for easier, faster loan processing but they need to upgrade originators’ selling skills to align with how consumers want to purchase services.
Think of every originator as being a potential QVC host. Yes, a QVC host. In the not-to-distant future, I believe artificial intelligence will handle the task of qualifying borrowers for mortgage products. An originator’s primary responsibility will be to create interest in buying a home and having it financed. To successfully connect with prospects, originators will need to become adept at video presentations, conducting webinars, and podcasting. Very few originators possess these skills today.
Zig Ziglar’s statement, “nothing happens until somebody sells something” is still true, but how the sale is made is changing dramatically. Lenders and originators who adapt to change will be better equipped to succeed in the long-run.