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Friday, September 20, 2019

The Future of Lending: Technology as a Force Multiplier

By Aneeza Haleem
September 9, 2019

Topics:
Aneeza Haleem
Cognizant
Technology


AneezaHaleemAneeza Haleem is a Senior Manager in Cognizant's Banking & Financial Services business unit, working mainly with independent mortgage banks, nonbank servicers and select depository institutions. She's taken up multiple roles in her career spanning both technology and domain consulting, always with an eye for challenging the norm. Aneeza can be reached at Aneeza.Haleem@cognizant.com; https://www.linkedin.com/in/aneezah/.

(Part One of a two-part series.)

Technology trends may ebb and flow, but separating hype from achievable return on investment is a constant regardless of the application, functional area and industry. Nowhere is this more apparent than in the mortgage lending space, where artificial Intelligence, powered by natural language processing and machine learning are solving critical business challenges and delivering ROI to early adopters.

A Smarter Way of Facilitating Mortgage Lending: Cognitive assistants already permeate our lives--scheduling appointments, reminders, playing songs, alarms, controlling house temperatures, activating security alarms. And smart homes are here to stay. But what about smart home buying? Let's consider two possibilities:

--A homebuyer looking to prequalify: Typically, he/she will either walk into a bank--> work with a personal advisor to fill out a prequalification form--> get a prequalification letter. Or, more likely, the homebuyer will browse a site such as Zillow or Redfin and use the prequalification calculators advertised. The Zillow/Redfin route is faster, and more convenient, but more of a ballpark estimate. The personal banker route is more accurate but more time consuming and requires more personal interaction.

--A homebuyer needs information on various product types: Again, the conventional approach is to speak with a loan officer or rely on Google searches.

Now imagine if a lending institution make its services available through a cognitive assistant like Alexa or Google Home? These scenarios would play out quite differently:

AneezaChart1

For the lender, the steps to review ‘financial and personal information would include:

AneezaChart2

Turning AI Opportunity into Reality
Investment in prequalification alone could help not only drive growth in prospects/leads, but also reduce the cost of origination. Even within the education spectrum of home buying--loan officers may not spend time on complex loans, given the lower ROI for the time spent, but a cognitive assistant could walk prospects and customers through countless scenarios at the homebuyer's pace.

For example, our Intelligent Mortgage Advisor platform (https://www.cognizant.com/cognizant-intelligent-mortgage-advisor) offers prebuilt flows (see below) that communicate product information, loan lifecycle, doc requirements and other hand holding activities to the prospective customer.

AneezaChart3

Similar use cases are drawn for loan servicing--imagine the multitude of questions contact centers manage that could easily be handled by a cognitive assistant. Has my payment posted? How much is my escrow? Why has my escrow amount changed this month? How much is my payoff quote? Or how about if we add predictive analytics and the cognitive assistant becomes more of an advisor--for example, say you received a bonus. The assistant could provide advice on how to invest it--"If you invest it on your mortgage, it would save you $X in interest over the course of the loan. Would you like me to make that transfer?" (Read how the insurance industry is applying chat bots: https://www.cognizant.com/whitepapers/the-future-of-chatbots-in-insurance-codex4122.pdf.)

Overcoming Security Concerns
All of this is fine, but the key concern we hear from clients and prospects pivots around security, specifically authentication.

Biometric authentication (https://searchsecurity.techtarget.com/definition/biometric-authentication) is a realm of security that is rapidly growing in popularity (and reliability).

Let's consider options again for authentication when using, say, Alexa:

--Have Alexa send an authorization code either via SMS or to the Alexa app on your phone.

--Use a numeric pin that the user has to say out loud.

The SMS authorization code option disrupts the entire hands-free conversation experience and a numeric pin could easily be overheard. So what do we do then you ask? Bring on--voice biometrics, authenticate on the go!

Voice biometrics leverages a sophisticated statistical algorithm to digitize the distinctive characteristics of a person's speech by to produce a unique stored model or voice print. Impersonators can copy the pitch and the intonation, but other physiological features such as vocal cord location and larynx structure are unique which make voiceprints as distinctive as fingerprints. Earlier platforms relied on active voice authentication (customers reading one or a series of set phrases) but during the last few years passive voice authentication has emerged, where set phrases are no longer needed.

One of our clients, a U.K.-based major bank, sought to reinforce how it authenticated transactions in its self-service mortgage modules to reduce back-office time and effort spent on verification. We implemented an on premise voice platform using Nuance Voice (https://www.nuance.com/omni-channel-customer-engagement/voice-and-ivr/modern-voice.html), integrated seamlessly with its existing Avaya & Cisco IVR infrastructure, which analyzes user's tone, pitch and rhythm of voice passively. This platform enabled superior customer experience by eliminating the need for a password/pin/passphrase.

Just as importantly, it drastically decreased fraudulent transactions and reduced verification time by ~80% (~1 minute to ~10 seconds), which has not only enhanced customer experience but delivered clear ROI. For a financial institution, it's about penetrating a new market and potentially creating a new channel of communication to extend hyper-personal customer service.

Banks with the vision and courage to enter these territories could rapidly build a strong brand position as game changers. Consumers are hyper-sensitive, loyalty is fickle, institutions are desperate for differentiators, margins are ever-thinning and these trends could be the nostrum that gain favor.

Part 2 will explore how blockchain is enhancing lending globally.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)

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