Article

Lending Perspectives: Planning for Disruptions

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Bill Vogeney Photo
Chief Revenue Officer
Ent Credit Union

5 minutes

Getting started and using scenarios can help leaders in coping with the pace of change

Look at your surroundings: Disruption is happening everywhere, especially in the business world. Whether it’s a fintech company planning to revolutionize lending through the mobile experience, or artificial intelligence replacing human workers, there are plenty of signs that the pace of change in our industry over the next two to 10 years will be faster than what my credit union friends and I have experienced during our careers to this point.

It’s very easy under this current set of circumstances to be afflicted by a certain sense of paralysis by analysis in developing a strategic plan to address future disruption. What should you do? How can you ever compete with Amazon? If I think about it too much, I just want to curl up in the fetal position; yet that’s not exactly the most productive way of coping, is it?

There are two mindsets that I think can help credit unions, and especially lenders as they’re near and dear to my heart, in coping with the pace of change and the absolute certainty that our business is being disrupted and will continue to be disrupted:

1. Get started NOW!

One of the things that’s evident in the mindset of the disrupters is this: They have learned to fail fast. They don’t have the luxury of waiting to get an idea perfectly implemented. Develop the idea, implement it fast, iterate the concept and, if it fails, make sure it fails fast. Time is wasting. I liken this mindset to the ancient fable of the tortoise and the hare. In one version, the fast-moving hare gives the tortoise a head start in a race and finds that he’s unable to catch up. In another version, the hare takes a nap halfway through the race and awakens to find he’s hopelessly behind. The bottom line is that no one can accurately predict the future. The race course between today and the future is not a straight line. There will be nearly an infinite number of mid-course corrections necessary along the way. The faster your organization can adapt to this mindset of implement, observe, iterate, the better.

2. Visualize your future through scenario planning.

I may be only slightly joking, but it’s clear to me that Amazon won’t stop until it rules the world. There will be one worldwide company, and it’s Amazon. As I previously pointed out, it can be a paralyzing thought. Let’s break down the threat Amazon is to mortgage lending. How could Amazon disrupt that market? (If there’s a market that’s ripe to be disrupted, it’s mortgage lending.) Fannie and Freddie, VA and FHA all contribute to a glut of guidelines and rules that has made mortgage lending extremely labor intensive. What if Amazon leveraged artificial intelligence to automate much of what’s done manually in our mortgage departments today? Perhaps it creates a whole new version of the secondary market? Imagine if Amazon approached Wall Street with this proposition: “Our company is going to revolutionize mortgage lending. We’re going to get rid of Fannie Mae and Freddie Mac guidelines, use machine learning to decision loans immediately and eliminate much of the onerous documentation that’s done today. Amazon needs partners to buy these loans. Is Wall Street in?” You can guess the likely answer.

How can you deal with this future? Leverage what you can! Buying a house and getting a mortgage is stressful. Borrowers will have a lot of questions. While Amazon could likely implement AI to answer a wide variety of borrower questions, it’s unlikely that AI can handle all scenarios, and it’s also highly unlikely that Amazon would also invest in humans to answer these questions. 

I can look to Quicken Loans and Rocket Mortgage as a current example of the limitations of automation. Quicken Loans and Rocket Mortgage made more of an impact on the refinance mortgage market as they’re dealing with more experienced borrowers, yet they still lag on the purchase market, where a large percentage of buyers are going through the mortgage process for the first time and need a lot of hand-holding. 

Realtors® who have an interest in the sale and loan closing on time also need a fair bit of personal attention. The local Realtors® we work with typically have had bad experiences with Rocket Mortgage and when they’ve had to reach a Quicken Loans representative on the phone. A strategic plan to compete with an “Amazon Mortgage” would likely have to rely on an extremely high level of responsive, local and knowledgeable service to borrowers and all interested parties. 

This scenario is just one possibility for your planning, especially as it pertains to Amazon. When you sit down to think this through, start with some aspects of your business that are ripe for disruption. Consider the tradeoffs that will inevitably be made to come up with the category-killing idea. Use those inherent weaknesses to build your future business model. Don’t look back.

In short, there is something to be said for having a plan. I had a strategic planning professor during my MBA program that once said something like this: “The best part about having a strategic plan is that you can rally the troops around the plan. It doesn’t have to be the greatest plan in the world if you execute it well.” 

Yet it also helps to remember Mike Tyson’s famous quote: “Everyone has a plan until they get punched in the mouth.” The earlier you implement your plan, the further down the race course you’ll be, and better prepared to make the course corrections (or avoid the punch in the face).cues icon

Bill Vogeney is chief revenue officer and self-professed lending geek for $5.5 billion Ent Credit Union, Colorado Springs. 

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