The US mortgage industry is going through a technological transition. Mortgage has been on the low priority in terms of automation and outsourcing in whole banking chain. But with increasing interest rates and competition, Mortgage banks are looking for ITO and BPO as long term strategic tools. India is fast becoming a Mortgage manufacturing hub, with its strong competitive advantage over other economies like China, Canada, and Philippines etc.
Some reports suggest that the offshore “BPO market size for the US Mortgage is in the range of $6 - $7.4 billion. The existing mortgage processing BPO market in India is approximately $150 million and it employs about 7500 people. It is estimated that the US mortgage banking BPO market in India will grow to approximately $1 billion over the next 5 years.”
The range of processes is being outsourced by mortgage lenders in three areas of the mortgage processing life cycle, from acquisition to origination to servicing. However, today the most mature market in terms of outsourcing is mortgage servicing. The loan processing is another area which can fetch in upto 50% of cost savings if offshored to destinations like India.
Acquisition is another area with potential, particularly in areas such as analytics and lead generation. Companies like Equinox which have developed their competencies in Mortgage by running more than 32 different mortgage processes from their facility out of India has come up as leaders in Mortgage Process Outsourcing. Other sections of Mortgage Industry which will extend opportunity to outsourcing organizations will be Brokers. We see lot of activities happening in area of lead generation and end to end loan processing.
North American banking is going through a consolidation phase, it has thrown basket of opportunities in space of BPO. Biggest challenge in any consolidation is the integration of processes and functions. Success of consolidation also depends upon how fast organizations integrate. This is a very resource & cost intensive process and banks may look for external experts to help them though their consolidation phase by taking up outsourcable processes. Thus reducing the burden on internal resources, this also helps the bank to concentrate on their core competencies.
Though Offshoring and outsourcing seems to be strategic cost optimization tool, but the cost benefit depends upon how successfully the outsourcing project is executed. We have seen wide gaps between expectation and the deliverables. Recent study states 70% of participants had significant negative experiences with outsourcing projects.
One of the differentiators for future players will be strong domain expertise and solution based offerings which also help the client in possessing best practices into their processes and systems.
Manu Tandon is heading marketing for a large BPO company based out of California, US. He is MBA in marketing and has worked with large Multinationals in sales and marketing functions. He has extensive experience of selling high end IT solutions. His interest lies in writing articles on Business Strategies, Globalization and Political affairs.
