Unisys’ Business Development Director Adam Oldfield
The financial services sector is often one of the last industries to embrace technological change – usually because of the levels of risk involved. Mortgage Servicing providers are no exception. The IT applications which underpin many of its processes are usually based on long-established, legacy architecture. Uprooting all this and moving to a new platform, or even the cloud, is seen to introduce a threat of down time, lost revenue and disgruntled customers.
As a result, in today’s competitive market, changing a mortgage or savings servicing system is rarely a high priority. Unless compelled to do so by an external event (such as an acquisition bringing about a platform merger), or a system proving to be severely unfit for purpose (e.g. increasingly difficult and costly to maintain and keep up to date) even significant cost savings aren’t enough to trigger a migration decision.
IT pays to be bold
However, this conservative approach will only spell trouble, restricting mortgage servicing providers in the long run as rivals move to more dynamic systems able to keep up with customer expectations and ever evolving regulations.
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There have been three high profile cases in recent times where mortgage servicing problems have directly impacted upon customers, tarnishing the reputation of the lender. As well as having their names in the press for all the wrong reasons, the involved companies faced significant fines from the regulator, which ultimately cost them more than a service system replacement. Given that reputations are hard earned but easily lost, mortgage service providers should take heed and ensure servicing system improvements are a much higher priority on the IT agenda.
For bold and progressive organisations, a number of benefits can be obtained by upgrading mortgage services IT infrastructure:
- Improved flexibility and speed to market – modern infrastructure allows for unique modules to be created, handling separate customer offerings or processes, such as for mortgages, savings, client accounts and lending
- Improved customer relations – a modern IT platform allows providers to take a clearer view of the customer, such as a cross-business analysis of what services they use. This allows offers or contract renewals to be personalised, taking into account every aspect of a customer’s interaction with the company, rather than an old fashioned siloed approach
- Improved security and mitigation of risks – new platforms can integrate modern security technologies, such as data encryption, with the original solution’s security and compliance controls, minimising any concerns about the safety of sensitive data in the cloud.
Compliance is key
While the up-front costs and disruption involved in replacing serving systems may seem daunting, the benefits and on-going cost savings can be very persuasive. Indeed, some of the UK’s largest companies have recently taken this bold step.
In March last year, Lloyds Banking Group consolidated its mortgage lending systems by successfully completing the migration of loans from its legacy HBOS Borrowers platform to Unisys’ UFSS mortgage servicing solution. This involved successfully moving £145 billion of assets from one platform to another over a single weekend – a staggering 1.7 million mortgages.
As a result, Lloyds will derive considerable benefit from the new platform, including ongoing compliance with an ever-changing regulatory framework. The need to respond to even slight amendments to lending rules can be disruptive, requiring business processes to be altered, which in turn can involve major changes to the IT systems that support these procedures. With UFSS, our clients will have access to two major releases of the platform each year, each of which includes functional enhancements and regulatory changes, as well as technical and architectural improvements.
Survival of the fittest
Few businesses survive by standing still, especially those with a customer-facing side. Even today’s longest living businesses have undergone numerous changes and periods of internal evolution to remain competitive. Financial service organisations are no exception. As more players enter the FS sector (think Bitcoin or Apple Pay, to cite two well publicised examples) established organisations will need to up their game and ensure the foundations on which they are built are flexible enough to move with the times.