Do you remember watching Super Bowl 2016 and seeing the Rocket Mortgage commercial? You know the one that starts out like this, “What if we did for mortgages what the internet did for buying music, and plane tickets, and shoes? You would turn an intimidating process into an easy one. You could get a mortgage on your phone! And, if it could be that easy, wouldn’t more people buy homes?”
If you don’t recall this commercial, and wish to relive that magical moment, you can access the link below. Well, plenty of people weren’t pleased with the message Rocket Mortgage (Quicken Loans) was delivering, including the Consumer Financial Protection Bureau that tweeted this message: “When it comes to #mortgages, take your time, ask questions and #knowbeforeyouowe.”
Rocket Mortgage has to comply with the same qualified mortgage rules as any other lending institution. A Rocket mortgage has to meet the same lending guidlines as those loans generated by commercial banks. Eventually, the critics have moved on and Rocket has introduced new and more modest commercials.
What is remarkable about Rocket Mortgage is how the company applied technology to streamline the lending process, making it easier for consumers to obtain their preferred financing option.
Through the Rocket smartphone app, an applicant can authorize access to their bank records and other financial information. There is no need to gather proof of employment, tax returns, and bank statements. The application process is handled through a smartphone. I have attached a link below for Rocket’s explanation on how the process works. This is a brilliant example of fintech. I can now buy a house through an app! Having gone through the home buying process a few times, I can understand the appeal.
Online lending, whether it is for residential mortgages – or commercial loans, is a perfect opportunity for fintech. Most likely, online lending has poached some relationships from your institution. This is a faceless, contact-free lending process. I am sure online lending appeals to many consumers as well as to many businesses. And, in most cases, these customers receive instantaneous responses.
A few leading online lenders include: The Lending Club, Avant, Prosper, Kabbage, and OnDeck. These companies don’t have a loan office down the street, but they do have a growing digital presence. They just might have your customers’ attention. Not all of these companies have the resources like Rocket Mortgage to run ads during the Super Bowl (which by the way resulted in 14,000 hits within the first minute that it aired). It doesn’t take millions to have a virtual presence on the internet. Online lending companies allow your best customers to apply for a loan (business or personal) at any time of the day or night. Again, this is a brilliant example of how fintech can directly impact your business.
There has been quite a lot of bad press recently about some of the online lenders. The press focuses on management changes, earnings disappointments, and regulatory challenges, but the concept of online lending has been validated by consumers. Enough so that an American Express venture, Working Capital Terms, will soon be offering online lending to small businesses at competitive rates. This new company is promising quick approvals and money will be deposited into the customer’s account within a few days.
Big banks are doing the same. Currently, Wells Fargo is developing a program, and Chase is collaborating with OnDeck. In time, some of the players may go away, but the ones that remain will become strong competitors. Successful online bank and non-bank lenders will reshape lending as much as Rocket’s initiative.
Online lending warrants ongoing attention and scrutiny from members of your management team, including your chief lending officer, IT executives, retail banking officers, and others. Discuss alternatives that exist today with your core provider. If your vendor doesn’t meet your needs, keep looking. There are stand alone alternatives that you should pursue. Even if your bank does not have the need presently, you should be exploring the alternatives and recognizing that there is increasing competition from online vendors that may impact your bottom line.