The world of loan payments has transformed dramatically over the past year due to the COVID-19 pandemic. Borrowers want and need more from their lenders, including expanded options on when, where and how to make payment. Lenders and servicers, meanwhile, want to help borrowers pay on time in the quickest, smoothest and safest way. So, what is the role of the mortgage originator in this evolution?
For originators, retaining past clients is always top of mind, especially as fewer than one in five refinance borrowers return to the same lender. Previous clients unhappy about this part of the borrowing experience may be unlikely to contact you about their future lending needs.
By staying on top of mortgage payment trends to understand their causes and effects, you or your servicer can make informed technology investments that increase on-time payments, deliver a better client experience and lower operational costs. Here are some trends sure to impact loan payments now and further into a post-pandemic marketplace.
In 2019, the U.S. ranked sixth in the world for mobile payments usage, with only about 10% adoption of major mobile payment platforms. By April 2020, however, 51% of Americans were using some form of contactless payment, including mobile wallets and tap-and-go credit cards, according to a Mastercard poll.
This growing comfort with mobile payments for goods and services is certain to push boundaries on bill payment as well. Millennial and Generation Z consumers, the oldest of whom are nearing 40 and who comprise 50% of the U.S. population, will drive adoption — and they may take their parents and grandparents with them.
Why now? First and foremost, COVID-19 has made remote, contactless payment options both desirable and necessary. With this comes consumer demand for mobile-friendly payment options, including debit,
Apple Pay and Google Pay, making bill payment from a mobile device easier and more convenient. Further, mobile and digital wallets are gaining popularity among younger generations, where the adoption rate is more than 40%.
So, how will this impact mortgage lending? Mobile technologies will gain a larger foothold for bill payment as digital natives age, start families and buy homes. Already, millennials make up 38% of homebuyers, according to the National Association of Realtors. Members of Gen Z (the oldest of whom turn 24 this year) are expected to trump this share over the next 15 years as they enter the homebuying market.
Thus, now is the time for the mortgage industry to develop bill payment methods that connect with digital-preferred homebuyers, or to partner with a bill payment platform to do so. Lenders must make sure their mortgage payment platform enables mobile payment options, including digital wallets. Otherwise, they may lose clients who prefer having more options for loan payments.
Client engagement used to mean a monthly billing statement and a “thanks for your business” holiday card at the end of the year. These days are long gone, replaced by a fast-growing menu of customized communications that help inform and motivate your clients. In fact, for mortgage lenders, the monthly payment is often the most frequent touchpoint they have with their borrower.
Nearly every American owns at least one piece of technology, including cell phones (97% of the population) and computers (77%), according to the Pew Research Center. These tools give clients more options for how and when they want to receive communications. They also equip businesses to provide communications at the click of a button and in increasingly individualized ways.
Consumers are busier and more distracted than ever, especially with COVID-19 disrupting home and work routines. They appreciate engagement efforts that provide helpful information or reminders, save time or effort, or help them independently find answers to pressing questions. Modern bill payment technology can help companies address these needs in new and creative ways.
Push notifications or text messages can be used to communicate important announcements, remind clients of payment due dates and even send verified payment links that borrowers can click to complete a payment. The messaging can be highly segmented by audience.
For instance, lenders can send earlier and more frequent notifications to those with a history of delinquency; specific payment links to those who use digital wallets to pay; or messages in Spanish to those who indicate this preference. Engagements also are ideal to help drive down service calls and increase confidence in the servicer — for example, by confirming when a payment is received through a nonelectronic channel.
Chatbots available on the servicer’s website use artificial intelligence to discern a borrower’s question and populate likely answers. This emerging technology is perfect for simple payment tasks and FAQs, such as how to access an account or check balances. It saves borrowers from having to call customer service for help — a big plus for those with digital-first leanings. This benefits lenders by reserving live agents for more urgent or complicated interactions.
Interactive voice response technology allows clients who prefer paying or seeking information over the phone to do so independently, 24/7, by following voice prompts. For lenders, it prevents customer service overload, and it also helps to maintain compliance with data-security standards when taking payments over the phone, since clients handle their own card information throughout the payment.
Mobilizing all engagement options keeps borrowers informed and empowers them to stay on top of their payments. They can pick messaging and payment options or schedules that sync with their preferences, technical abilities and everyday routines. Mortgage companies, in turn, will build a more engaged, loyal and equipped client base.
Of course, not all mortgage servicers have the IT capacity to independently create a fully modernized engagement engine, nor should they. A smarter use of resources is to partner with a tech-forward bill payment platform that has plug-and-play engagement options for lenders to adopt as needed.
Modern bill payment providers stay ahead of payment trends while focusing on tech development to make the payment process easier for borrowers and lenders. This frees lenders and the originators who work with them to focus on what they do best — developing and selling excellent mortgage products — without worrying about back-end payment technology challenges.
Clients have come to appreciate the ease, speed and convenience of direct digital payments for goods and services, as well as for paying their bills. Likewise, when they are due to receive disbursements such as payoff or escrow refunds, they want their money as quickly as possible, and this means electronically. A Visa study found that 76% of North American consumers prefer direct deposit of disbursements to any other payment method.
Faster money transfers through digital bill payments and disbursements makes bookkeeping and budgeting easier for families and businesses alike. Consumers know exactly how much they have on hand to cover expenses or pay bills, and don’t get stuck waiting for a check to arrive in mail. This makes it more important than ever for servicers to enable digital payments and disbursements to satisfy their clients and deliver a great experience.
Meanwhile, bill payments have caught up to demand in the form of direct digital payment technology. Clients can use a traditional electronic funds transfer system, or a debit card, Apple Pay, Google Pay or even cash, to conveniently complete a payment from any electronic device, day or night. On the billing side, push payments make digital disbursements possible by using the same system in reverse. The funds go straight from the biller’s bank to the consumer’s bank on the same day.
Both parties enjoy direct digital payments and disbursements because of convenience and speed. The biller appreciates all the protections of digital transfers, such as fraud detection and anti-money laundering programs, while avoiding compliance issues because only the customer handles his or her bank information.
With mortgages being the largest and longest-lasting expense for many consumers, making payment and disbursement easy and convenient is especially important. Borrowers can time their payment more accurately with the ebb and flow of their available funds, which means they are much less likely to incur late fees or nonsufficient funds (NSF) errors.
Servicers benefit from better management of cash flow, fewer NSFs and improved satisfaction. Additionally, the robust security measures of digital payments appeal to mortgage servicers. Consumers must authorize payment — and verify their account and phone numbers — so the chance of misdirected payment is small.
Just as consumers have adopted new practices that will stick around long after the pandemic, servicers now have the opportunity to leverage new technology to provide a better overall experience. They can introduce features such as text message reminders, autopay scheduling, and one-click payments to drastically reduce delinquent payments and encourage more self-service.
Luckily, modern bill payment platforms are already ahead of these trends and can help mortgage lenders integrate mobile payments, engagement tools, and digital loan payments and disbursements into their current operational system. Some include plug-and-play services that can transform the payment experience without complex, custom programming. This allows lenders and originators to pivot quickly to inform and educate current and prospective borrowers.
The world has changed over the past year, and so too have the needs and preferences of consumers and businesses. The mortgage industry will have an important role to play in this digital transformation if it follows the trends toward more flexible, convenient and borrower-focused loan payments. ●