March 18, 2019 – Everywhere you look, the digital revolution flourishes. Hordes of lenders and credit unions (CUs) are migrating to digital lending channels and front-end point-of-sale (POS) tools, actions swiftly on the way to being compulsory. A select few even tout fully digital end-to-end mortgage experiences. While their motivations are varied, the end result is the same – reinventing the borrower experience, as well as streamlining internal workflows. Improved speed and quality at lower costs.
If you are wondering whether the digitization of mortgage and CU ecosystems is here to stay, ask yourself why both Congress and regulators are increasingly wading deeper into this pool. It’s not out of mere curiosity, it is with intent to get ahead of the curve.
Further, the digital trend is not isolated to borrower-facing touch points. It’s infiltrating all aspects of our business, vendor sourcing included. It’s time to step back and take a view from the balcony, versus the day-to-day schlep.
In running a few vendor-centric companies, our team lives at the intersection of where vendors and their prospective clients meet. We often refer to it as ‘The Captain’s Chair,’ because it is an incredible view of the landscape. As such, we spend a significant amount of time collecting voice of the industry feedback from countless stakeholders on the buy and sell-side of vendor sourcing. Here is what we continue to see.
The following sourcing methods have existed for decades, but they are steadily becoming ‘lost balls in tall grass’:
- Word of mouth referrals
- Flipping through the Rolodex (first marketed 61 years ago)
- Static directories, buyers guides and black books
Let’s break down each of these individually. Referrals can be challenging, because it is unlikely the referring party knows the intricacies of your business, your exact strategic and operational needs. What may suffice for your friend or acquaintance could be radically different for what you require. Are they referring the vendor for the right reasons, or because he/she plays golf with the owner every Friday? Referrals can sometimes be a long, strange trip.
The primary risk in relying upon your Rolodex is they are so incredibly restrictive, as you have absolutely no idea the vast number of providers out there to consider. Do you really want to rely solely upon those few service providers that have somehow managed to find you and give a business card? That would be like going to a 5-star surf and turf restaurant, and only asking for the tofu menu. The same can be said on word of mouth referrals, much too limiting.
Technology, injected with intelligent workflow, has begun making static vendor directories, buyers guides and black books obsolete. You will see them disappear altogether in the very near future. How often do you order from a catalog you get in the mail? Maybe a better question is, how often do you even receive catalogs by mail?
Consider this example. In reviewing the details of a recent annual buyers guide, published for over 20 years now, there were 44 total pages, highlighting just 19 vendors. When there are literally thousands of vendors that serve the mortgage and credit union ecosystems, the limitations are quite evident. This is why we predict they will soon be relics of our past – a ‘Directory-osaurus.’
Consider the following with respect to industry professionals looking for vendors:
- We are all becoming digitally-dependent, never without our devices. Instant access to everything in life. We all know that uneasiness felt when we are without our smartphones. Scientists even classify severe cases as ‘separation anxiety’
- Millennials demand technology, not word of mouth. They are entering our ranks en masse, beginning 15 years ago. Many are decision makers, or influencers
- Procurement decisions are no longer made by a single person or department. Since 2010, when the Dodd-Frank Act became law, most procurement decisions are now ‘by committee,’ often 6-to-10 roles across the organization
- Virtually none of these committee members ever attend an industry conference. Further, many have no experience or desire for the vendor procurement process. They were placed on the committee to represent their department’s mission (e.g. legal, risk, compliance, infosec, oversight, operations, and more).
If you are a vendor, you now begin to see why the sales cycle has exploded into unprecedented territory. Later in this article, we offer some hope this will begin to retreat into more palatable cycles.
You may also find it surprising that in my eight years as the former Head of Vendor Management at a Top-5 mortgage bank, I never once attended an industry conference or event. Neither did many of my competitor peers. As the sole decision maker for several years, I often wondered whom sales pitches were being made to at conferences. And, I cannot recall ever a time when a conference attendee came back to me and said, “You really need to check this vendor out.” You may have been promised that exchange would happen. Unfortunately, it’s the common protocol of being told what you WANT to hear, versus what you really NEED to know. Polite, yes, though incredibly devoid of value to you.
Our Own Patterns – Mirrored
The digitization of vendor sourcing has already begun, mirroring the way we shop in our personal lives – via online marketplaces open 24x7x365, driving speed and efficiency, and shifting the power to those seeking to buy.
Sitting here thinking about taking my family somewhere on Summer vacation, I contemplate how I will plan and execute before and during the trip. All I have to do is name the following online ‘procurement tools’ I will probably use, and I suspect you will completely understand the ‘what and why’ without my having to explain:
Expedia; Travelocity / Airbnb; VRBO / Hotels.com; Trivago / TripAdvisor; Groupon / Uber; Lyft; Uber Eats / OpenTable; Yelp!
The reason you ‘get it’ is that these are the new habits for all of us. We are hopelessly addicted to our devices and will hardly make a move or decision without searching options online and being presented with instant refined and customized choices. According to Merriam-Webster, a habit is defined as, “an acquired mode of behavior that has become nearly or completely involuntary.” We cannot help ourselves!
Consider these stats published in November 2018 by CMO.com (by Adobe) – Consumers were expected to spend $124.1 billion online this past holiday season, which accounts for nearly $1 of $6 spent shopping overall during the November-December period. Fifty-seven percent of online retail visits will come from mobile devices (tablets and smartphones), accounting for 37% of total online purchases. Twenty percent of consumers said they would consider purchasing goods and services through a chatbot experience, and of that population, 40% said they actually want offers and deals that way.
A chatbot is a computer program designed to simulate conversation with human users, especially over the Internet. You likely don’t realize it, but most calls you get from charities are 100% scripted with pre-recorded voices, with a single phone rep using two or even three headsets and computers, doing nothing more than pressing pre-defined ‘hotkeys’ that launch the appropriate recorded response to you.
One specific consumer behavior we do not expect to become popular in sourcing vendors in our environment is the dependency on online ratings and reviews of vendors. We see this purely as a business-to-consumer (B2C) phenomenon, a wildly popular one at that. We just do not anticipate the widespread demand for it in our specific business-to-business (B2B) ecosystem.
The net message here – in our hyper-connected world, the way mortgage and credit union vendors are starting to be procured mirrors our life’s habits. The same structural shifts that are reshaping the U.S. retail buying behaviors are rapidly migrating into our industry. Buyers and sellers beware, and begin adapting now. Don’t go the path of Blockbuster Video, Eastman Kodak, Borders Bookstore and many other former Wall Street darlings.
The Borders example reminds me of a quote from a fellow Missourian, Mark Twain, who said, “A person who won't read has no advantage over one who can't read.” Borders failed to read the changing landscape all around them.
The Future of Sourcing is Here
Technology in sourcing will rapidly level the playing field for the smaller service providers, as they join an online marketplace that gets them on the radar – finally findable. Many rarely attend conferences, for a variety of reasons, namely cost. And, regardless of size, vendors are also starting to establish and grow digital marketing teams, while reshaping the traditional sales team structure.
Other changes we will see:
- Finding, researching and easily comparing potential service providers will be nearly instantaneous, compared to the inefficient and limited options of our past
- RFPs will be issued and managed online, with a much larger pool of intriguing players participating. Innovators, no matter how small, will get their messaging out much more effectively, reaching the desired audiences with more success
- Sourcing technology will help eliminate the inexperience of some committee members making decisions as a team, instead becoming a value-added tool to enable them. Each member can use search filters critical to the specific department they represent, and then the committee can eventually meet and find common-ground vendors that were discovered via independent searching
- Both sides of the marketplace will rejoice, as procurement cycle times should be substantially reduced, as will associated costs
The above changes outline what’s already in motion in vendor sourcing. Expect to see comparable levels or disruption that is taking place on the front-end of residential lending processes.
Today, if looking to find potential vendors for your Request for Proposal (RFP) with the following criteria, traditional search methods will take many days:
- Appraisal Company
- FL, GA, AL, MS, SC, NC
- VA Appraisals
- SSAE-16 SOC-2 Certified
Good news – with search engines, results can now be produced within minutes, if not seconds.
Speed is dictated by how fast you can select the search filters most important to you. Attempt the same appraisal company search above via a static directory, buyers guide, black book or a generic Google search. Not pleasant.
We have the need for speed and efficiency with instant pre-screened results. This helps explain why none of us can watch TV, even for just a 30-minute segment, without seeing multiple commercials for search engines in just about every industry. They obviously work, or there would not be the kind of spend to build, launch and advertise them, which collectively must rival the GDP of some countries around the globe.
There are more advantages for vendors that elevate interactive search engines over static directories, in our industry and everywhere, such as:
- Online linkage to all your social media accounts
- Video marketing has become one of the hottest methods to engage audiences, easily embedded in the vendor profile
- The ability to monitor real-time stats (e.g. traffic, impressions, click-thru rates, etc.). Some sites may even capture data on exactly who is visiting your profile. The capability does exist. Beware that the searchers (shoppers) overwhelmingly do not like it, and will not likely become repeat visitors to your site if they cannot do it anonymously
Times have changed. Culture has changed. People have changed. Question is – Have you?
On The Record
Let me go on the record and say it was totally my loss for eight years not being able to attend industry events. I go every chance I get these days. They are highly beneficial on so many levels, so long as I keep all these changing dynamics in mind and ensure they drive my event game plan. In fact, our Head of Sales is at a week-long conference as I write this.
And, while officially on record, let me add – It is not a matter of ‘if’ these trends and predictions will happen, it’s a matter of ‘how fast.’ This marketplace that we serve is rapidly changing. Success means adaptation. Twain also wrote, “The secret to getting ahead is getting started.”
Thanks for reading.