To outsource or not to outsource? Many banks and credit unions weigh which is the smartest approach: keep everything in house or outsource certain tasks to knowledgeable vendors to save time and add efficiency. There are many benefits to outsourcing areas like mortgage services, and external challenges today make outsourcing even more attractive.
Challenges in 2021 and beyond
Banks and credit unions are facing serious challenges in the industry and market, which require resources and attention to properly address. To effectively focus on these challenges, many institutions benefit from outsourcing non-core business activities like tax monitoring, escrow processing, and flood determination.
Challenge #1: Pandemic-induced economic uncertainty
After a year no one could have predicted, banks and credit unions are busier than ever helping their customers survive in an uncertain economy. The beginning of the year saw a rush of Paycheck Protection Program (PPP) loans from small businesses, which financial institutions had to process quickly to ensure their customers survived. Meanwhile, extremely low interest rates led to a flood of people looking to refinance their loans.
Banks and credit unions had to handle these urgent requests while also continuing to perform their core services. Financial institutions who lack the proper resources and support can't manage everything they need to do with the quality and care it deserves, leaving customers frustrated at best and facing economic ruin at worst.
Challenge #2: Digitization of the industry
More and more banking is done online or via a mobile device today, and financial institutions must adjust to this reality to stay in business. Disruptive tech solutions are entering the market offering digital-only banking services, directly threatening long standing financial institutions. It is no longer feasible to focus the majority of business operations on the brick & mortar side of the business.
To stay competitive and continue attracting younger generations, financial institutions must focus more on digital banking options, become more operationally efficient, and embrace technology. Banks and credits unions who don’t rise to this challenge may not survive the next 5-10 years as banking becomes more digital and remote.
Challenge #3: Cybersecurity
Cybersecurity remains a critical challenge for any business today, but financial institutions more than any other. Financial institutions are targeted by cyber threats 300 times more than other U.S. businesses and the rate of successful breaches have tripled over the past 5 years.
As banks and credit unions work to shore up their cybersecurity, cybercriminals find more and more ways to break through their systems, perpetuating a never-ending challenge. Unfortunately, most cybersecurity efforts today focus on addressing the types of attacks that have already happened rather than proactively preventing new types of attacks. Current technology isn’t able to anticipate the countless new, innovative ways criminals continue to find to penetrate digital records. This is a challenge financial institutions will face for the foreseeable future, and one that every bank and credit union must devote appropriate resources toward to protect their clients.
Benefits of outsourcing mortgage services
These enormous challenges are just two areas banks and credit unions must focus on in 2021 and beyond. Because these problems are so momentous, the most efficient way to tackle them is to reallocate time, labor, and financial resources to addressing them. That’s where outsourcing other key activities can be advantageous.
For instance, banks and credit unions can benefit hugely from outsourcing various mortgage services, including real estate tax monitoring, escrow processing, and flood determination. Outsourcing these services can offer the following benefits to financial institutions:
In many cases, outsourcing mortgage services is actually more cost-effective than managing in-house. Third-party experts can complete the work with higher accuracy and efficiency, and most offer reasonable rates (that are often passed along to the customer).
When internal staff is freed from handling extremely time-intensive activities, such as tax monitoring and delinquency tracking, those resources can be used for other core business activities. Time and money that were dedicated to those tasks can then be redirected to addressing other key challenges.
If you partner with the right vendor, your borrowers won’t see any difference in customer service—or if anything, may experience even better service than before. A tax servicer will ensure accuracy, timeliness, diligence, and compliance to ensure your borrowers get the best customer service experience possible.
Still wondering if outsourcing is right for you? Check out one of our most popular ebooks: The Importance of Planning Ahead when Outsourcing Real Estate Tax Monitoring.