A “Fool’s Gambit”—Surviving until 2025?
Investors know, to base future strategy on historical performance is a “fools’ game.” Industry challenges cannot be turned successful by “shrinking operations”, “waiting for health”, “being simpler”, or even clawing back contractual signing bonuses. To survive and prosper “until 2025” requires a complete redesign of processes, personnel, and most importantly data.
By Mark P. Dangelo
The full article and graphics can be found at –>A “Fool’s Gambit”—Surviving until 2025? A Mark Dangelo Editorial – MBA Newslink
“Doing more with less” has been a slogan for industries and consumers for decades. Today, the lending industries once again are reverberating from harsh realities—volume declines squeeze margins (pushing under 50 bps per loan), reduction in industry employment (> 20% decline since 2020), and an acceleration in the demand to streamline operations.
Not since the Great Recession have BFSI and IMB industry leaders been forced to holistically reformulate their operations given the peak to trough volume decline of nearly 70% over the last three years. However, this transformational outcome will not resemble previous models. We only need to glance at the MBA Charts of the Week and Quarterly Performance Reports to understand the unprecedented industry challenges. From nearly every indicator, this historical decline and anticipated future recovery is not traditional.
What will be different? What will be the lingering impacts on operations? Will volume normalization just mean smaller operations? And what will the rise of Millennial and Gen-Z homebuyers demand when it comes to engagement? These and dozens of additional questions, each more pointed, will demand answers that permanently alter the lending landscape moving into 2024. The heralded designs and technologies of the past are now the foundational building blocks of the future.
To anticipate the “next gen” markets, the traditional approach to consumers and markets coupled with compartmentalized usage of FinTech will lead to further commoditization of products and services. Digitalization of processes will be abandoned for native digital solutions as the isolation and reuse of data will dominate as innovative, competitive differentiators.
Anticipating the “Next-Gen” Markets
For some leaders within BFSI, their corporate strategy for 2024 is to become a “simpler, smaller company.” Facing a confluence of interconnected factors—23-year high rates, continual home price increases, stubborn inflation, a “hot” domestic economy, and record low housing inventories—lenders are experiencing a perfect storm of market conditions against traditional business practices. Moreover, margins continue to shrink, profits have fallen by double-digit percentages, and the mortgage industry finds itself designed for vastly different consumers, markets, and operations all within an 18-month span.
To understand more than the chaos of today, BFSI and mortgage leaders must determine and navigate financial conditions that they never anticipated during the last 14 years. The time and money spent on securing systems and technologies were focused on volumes, and the need for efficiencies on a per loan basis was aided by the ubiquity and capabilities of cloud computing, SaaS, and widespread data replication.