Last year saw a flurry of activity as opportunistic lenders and product providers took advantage of the fact that the rapidly growing protection market was non-regulated by investing in e-commerce solutions to automate the sale of non-regulated products.
But in 2004 the mortgage market has a new priority and is faced with a serious deadline. Mortgage regulation comes into force on October 31 and you must either comply or go out of business.
The cost-effective way to survive in the FSA regime is to automate your sales process, either with a full multichannel e-commerce solution or by implementing an incremental solution, channel by channel.
Regulation is the current challenge but a future-proof e-commerce solution must be able to cope with the next market challenge – which will be CP 197/198. As if mortgage regulation was not enough, it is proposed that the mortgage market, along with the rest of the UK financial services industry, will provide the FSA with aggregated data from individual product sales. For the first time the FSA has defined a technical reporting language that lenders must use – XBRL (eXtensible Business Reporting Language).
Change is the only constant in the mortgage market and regulation will never remain still for long so if mortgage lenders intend to make a stand and invest in an e-commerce sales solution for their direct sales or broker networks to support a regulated sales process, it is going to have to be a flexible one. As soon as mortgage regulation comes into play you can be sure there'll be another CP waiting to take centre stage.
The majority of lenders have a sales solution with some degree of automation, whether this be consumer advice via the web, a point of sale solution for a direct sales force or a broker extranet.
However, most are bogged down with legacy systems that have a heavy compliance bias and are hard-coded to specific requirements. These systems were probably great when they were introduced for a specific purpose but are not now able to evolve with the organisation or the industry. Legacy sales solutions are notoriously inflexible, costly to change and built specifically for the requirements of an individual sales channel.
There is never-ending speculation over the future size of the UK mortgage market. In 2003 analysts were predicting a housing market crash similar to that of the late 1980s but the industry tells a different story. In January the Council of Mortgage Lenders issued a press release predicting that UK house prices will rise a further 8% in 2004 and that gross lending will rise by 6%.
The UK mortgage market is attractive and an area worth investing in but the clock is ticking and if lenders want to survive they must act now.
Regulation brings with it a cost burden but by having a solution in place to ensure a compliant sales process for when regulation hits, lenders can avoid having to transfer these costs onto their clients.
Being able to sell mortgages and associated products efficiently will satisfy the demand for one-stop products and provide a better opportunity for intermediaries to cross-sell. And making the sales process more efficient will do no harm to the relationship between lenders and intermediaries, either. If the cost of sale is reduced lenders will be able to transfer the benefits along and offer greater commission.
The tricky part is selecting the right IT partner. So what should lenders look for in an IT company to ensure that they get an automated sales solution that can effortlessly adapt to change?
First, companies will need to choose a partner that can provide a solution quickly to hit the FSA deadline. IT companies that use Rapid Application Development techniques combined with a toolkit approach are more likely to be able to deliver fast solutions.
Ideally the chosen technology partner will be able to access a pre-built library of business components that can be used as the basis for building and deploying a complex array of business processes. If these components are based on XML they can easily be rebranded and reused across another channel such as the internet, intranet or extranet without having to reinvent the wheel.
An XML solution that incorporates style sheet technology will enable a solution to be branded according to the lender's corporate channel requirements. In other words, a mortgage application form on a website can look and feel completely different to that same application as it is sold via a broker network solution.
2004 should be the year when the mortgage market starts to make IT happen. Increased productivity, shorter sales cycles, increased volumes of business, more cross-selling opportunities and reduced administration costs will deliver financial rewards to lenders and intermediaries. October 31 may be the catalyst but the benefits to be achieved from sales automation will go way beyond the initial requirement to comply with FSA mortgage regulation.
Planning a sales automation project
There are a number of criteria that companies should look at when planning a sales automation project:
Speed to market
Time is of the essence but although the October deadline looms ever closer, in Focus' experience it is possible to design, develop and deploy an automated sales solution for a financial services organisation in just three months
Return on investment
It is not unusual for finance directors to demand a 12-month return on investment as a criterion before signing off the budget for a project
The modern approach to sales automation involves building a single solution that can be deployed across multiple distribution channels, whether online or offline and operating on any technology platform
Component-based solutions can be implemented on an incremental basis depending on the project scope
Ability to differentiate the solution from the competition
A solution that can be developed to specific business requirements rather than an 'out of the box' solution will enable your solution to be differentiated from the competition
Future-proofing the solution
The solution must be easy to maintain and quick to change providing a system that is flexible enough to adapt in response to future regulatory changes