People in the information technology (IT) department are on the front lines of keeping computer software and systems operating smoothly. That also means IT is the first to realize when those systems are no longer able to keep up with company goals or industry demands. Yet those experts are sometimes put in a newfound situation—how do they make the case for improving financial technology (FinTech) in a way that speaks the language of cautious executives? Here are some ways that IT stakeholders can propose an investment in better FinTech:
FinTech Increases Market Share
IT team members could note that modern lending software creates greater selling opportunities with a highly profitable market: small-to-mid sized enterprise (SME) clients. 60% of small business owners say they would prefer to apply for loans entirely online, hinting at the larger trend of clients preferring digitalization in lending processes. Lenders with paper-heavy loan operations are forfeiting a chance with SMEs that feel digital solutions are better for business. SMEs are an incredibly valuable market, because while loans cost about the same to produce, SMEs provide greater profit based on the typical loan amounts they require.
It is estimated that the total market for online SME lending is $280 billion, but Harvard Business Review predicts that the SME market will be rife with competition from smaller lenders with an emphasis on financial technology. One of the best ways for established lenders to compete with smaller, more agile competitors is by dedicating resources toward innovative technology solutions.
Thrive Despite Industry Changes
When making a proposal to executives for modern FinTech, team members could also discuss how better technology is a great way to adapt by improving processes and reducing production costs. The mortgage industry is an example of a loan market with rising costs. A survey by the Mortgage Bankers Association (MBA) found that the average cost of producing a mortgage loan has increased $1,788. In other words—lenders who do nothing to upgrade their technology for loan production will likely continue to see those high costs per loan, while lenders who prepare by upgrading will be more competitive.
Need to show what kind of technology can help? Automation helps solve the problem of rising loan-production costs by reducing data entry times and human errors that delay closings. Accenture calculates that automation ecosystems create a “material impact” on cost-income ratios of loans by reducing costs more than 30%. Lenders can create competitive offers when loans are less costly to produce, and lenders with costly production will struggle to justify their higher fees. A client comparing two lenders will certainly consider added fees as a differentiator.
Other Lenders Are Already Getting Started
The IT department should also make upper management aware that many other lenders already have technology upgrades on their roadmap. 76% of lenders surveyed by the MBA claim to have all or mostly electronic mortgage processes. Additionally, 71% of lenders see new technology as an investment toward innovation rather than an expense. Lending companies of all sizes are beginning to see technology as a short-term cost for long-term gains. The agility of startups is something to be mindful of as a large company, but large competitors can certainly outpace an indecisive company as well.
IT folks could ask the marketing team: 89 percent of marketers expect customer experience to be their primary differentiator this year. Lending interest rates are essentially the same, but the way a client feels about a company can be vastly different based on how efficient their operations are. Ultimately, technology that benefits the client experience is key to market competitiveness and relevancy. The desire to keep clients happy is something everyone can agree with.