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Joe Zeibert, Nomis' Managing Director of Global Mortgage Solutions, recently made the leap from big bank to small tech company in the hopes of solving some of the largest industry challenges he had run into in his tenure. I sat down with him to get his perspective on what's going on in the market and how he plans to take his personal and professional banking experiences into helping other institutions flourish.
CA: Retail banking is undergoing significant evolution and adaptation. Which factor is affecting the lending side the most?
JZ: There are a couple of items that are really at play on the lending side. For mortgages, margins and capacity are always at odds — but even more so with the wave of mini-refinancing booms we’ve seen over the past eight months. At the end of November, when the 10-year ticked under 3%, it led to 2019 starting off with a strong refinancing boom in a year that we thought was going to be dominated by purchase. Since then, rates have continued to come down, increasing the demand for refinancing and stressing industry capacity. When the whole industry is stressed for capacity, margins start to widen out and this adds profitability across all lenders. However, not all lenders have caught up with their capacity concerns, and those that are have been able to lower margins again and push volume even faster. It’s a ‘keep up or get out’ race right now. This comes on the heels of years of more steady rates, so many banks do not have the muscle memory to remember how to flex capacity quickly without incurring high costs.
The second major factor is the race to deliver better customer-facing technology. Everyone is knee-deep in a Point of Sale endeavor. The trick is building the right POS system to provide a better experience versus just adding a coat of paint to an old system. Time will tell who invested properly and who just duct-taped together a pretty front end to seem relevant. Regardless, investment in technology has never been more important. The mortgage industry has always lagged on technology innovation, but with the rise of the mortgage fintechs, that is no longer the case. Everyone is speeding ahead to make their customer experience the best it can be. The next focus, once the front end is figured out, is going to be the back end. Not processing, but back-end banking. Pricing more dynamically, by channel, in real time, with more insight so you are competing hour by hour to win, not just day to day or week to week.
CA: In what way have customer-centric financial institutions adapted to deliver?
JZ: The core focus of everyone now is customer experience, or CX. But there
is a lot more to do. The industry is solving CX during the fulfillment and sales processes. We also need to solve CX during servicing and make that technology as advanced as our POS systems. The next puzzle that traditional banks need to tackle is around customer-specific pricing, offers and service.
How do I serve and price you as a life-long customer and not as a one-time transaction? Legacy bank relationship pricing is not going to cut it, going forward. Giving a static discount for on-line payments or for also having a deposit relationship has been done for years. ‘How do you reward ‘me for being me’?’ is key and you need to simplify the experience across the board.
I just re-financed my mortgage, as I’m sure many of you just did with rates where they are. It was a fantastic experience at my primary bank. I then decided I wanted to also change my credit card to be at the same bank since the rewards were way higher. I filled out the app online in 10 minutes. It should have taken one minute. They asked me how much money I made and what my profession was. The same bank that literally has my entire life documented, sees my direct deposit, and has my pay stubs from my re-financing, was asking the same questions all over again. I’d like to see them get to a point where the customer is underwritten, and not the product.
CA: There’s a lot of talk about what’s going to happen in the market over the next 12 or so months. What advice can you offer to those leading the lending charge?
JZ: Be consistent and look out for the customer. Mortgage is a highly volatile industry at times with re-financing seemingly drying up and then coming back in spades. Focus on the future, invest in technology, and do not stray from your course. Investments in technology and strategy take time to unfold, don’t follow every shiny object, but be true to your strategy and remain focused. Too often, I see banks spend months developing plans, only to leave those plans half-executed because they did not seem to be immediately working. Stick with it!
CA: From the banking sector to a software company: what made you make the jump?
JZ: I cut my teeth early on in a different industry in software and consulting, and working with some of the largest companies in the world. I have always loved that side of the equation. For better or worse, I also fell in love with financial services while in grad school and went into banking. At Bank of America I had the opportunity to build new teams, tackle unique challenges, develop new tech solutions and redevelop the theory and practice of equity pricing. I was then lucky enough to have the opportunity to build an entirely new mortgage vertical at Ally from the ground up. It was a decade plus of constant innovation and problem solving, and I had a blast doing it. When looking out into the future of my career I did not want to keep building solutions one at a time, for one problem at a time, at one bank. I wanted to solve multiple problems at many banks and have a career where my job was solving the most pressing challenges for the industry.
CA: What is the biggest “aha” moment you had in your past banking experience, that might serve as a bit of advice for others in this sector?
JZ: First is the power of pricing. I built elasticity down to the customer level and saw impacts tweaking pricing cells one basis point at a time. I was able to shift risk and balances and profitability as needed all though detailed modeling. Pricing is an art that sits on top of an extremely complex science. The problem is that people think they can just create the art because they are great artists and that things will work out. But if you don’t have the right tools and the right science and math foundations, you will be trying to paint a Picasso with just a paint roller and gallon of primer. You need the right tools and the right math to unleash your most creative artist on the problem of pricing if you want to compete with the best and brightest out there.
Is your Lending line of business on your mind? Reach out to Joe on LinkedIn with your questions, comments or to continue the conversation.