On Sunday evening, in response to the COVID-19 outbreak, the Federal Reserve reduced the federal funds rate, dropping its benchmark to 0-0.25%. As interest rates remain low (and are expected to fluctuate), lenders are experiencing an influx in refinance volume. Many mortgage lenders are executing an all-hands-on deck approach in response to higher demand.
Often, during periods of high-volume (and when hiring or “in-sourcing” is not an option), businesses consider outsourcing various functions and tasks in order to stay afloat and gain efficiency. This can be a powerful solution to maintain operations and keep up with higher demand; however, automation is often overlooked as a viable, long-term solution.
In this post, we break down when mortgage lenders may consider leveraging automation or outsourcing solutions. By understanding the value of each option, businesses can make strategic decisions and pull the right levers to drive cost-effective efficiencies that make the most of internal and external resources during periods of high-volume.
Automate or Outsource? Here’s How to Weigh your Options
Automation and outsourcing are both viable solutions for gaining efficiencies and maintaining business operations; however, these solutions each provide unique value. Understanding use cases for both automation and outsourcing can help you frame your business decisions and ultimately choose the appropriate tool or partner.
When to leverage automation
In general, automation is used to replace manual functions where human touch provides little value. Often, areas of repetition are the best candidates for automation because these tasks can be replicated through software that instructs machines to follow if/then decisions and rules to complete tasks. Automation also provides a layer of certainty that tasks will be completed the same way each time—for this reason, tasks that are prone to human error are often automated.
Benefits of automation
Automation offers a number of advantages for businesses. Below are a few key benefits of automation:
- Cost-effective: When automation is applied correctly, it provides a positive return on investment quickly.
- Immediacy: Most software as a service (SAAS) and automation tools can be deployed quickly and without much onboarding or set up time.
- Flexibility: Technology adds a layer of versatility. When business processes change over time, software is easily adaptable.
- Compliance and quality control: Highly-repetitive tasks can often open businesses up to risk for human error. Applying automation ensures that processes are completed the same way each time.
- Maintain a competitive advantage: By automating mundane tasks that can be done more effectively by a machine, businesses can offer their employees higher-value roles that help drive business-differentiating functions forward. A study by Unit 4 revealed that 67% of respondents said that implementing digital software solutions would be important to remain competitive.
- Employee engagement: Similarly, automating repetitive processes is essential in hiring and retaining the best talent. This also ensures that employees are able to prioritize their time to focus on more strategic initiatives where they are collaborating, problem solving, and adding value.
Questions to ask when considering automation
Automation is not a solution for every function and should not be used for processes that require a “human touch” such as highly-technical and specialized functions or those that require a neutral third party. Below are some questions to consider when determining if automation is the best fit for a particular task. If you answer yes to the majority of these questions, automation is probably a good solution.
- Is this a task that is repeated over and over?
- Are there often delays in completing this task due to bandwidth constraints?
- Are there security risks with outsourcing this task?
- Does automation exist for this task?
- Do you need to maintain a high level of quality control for this task?
Common candidates for automation
- Matching information between documents such as the lender and title company’s closing disclosures. Software can compare lender and title company documents to identify discrepancies. For example, Qualia’s Fee Collaboration tool provides title companies the ability to automatically and accurately match fees across their files without needing to rekey data.
- Post-closing trailing document retrieval. Products like Qualia Post automate the collection of trailing documents, freeing up post-closers to focus on other critical parts of their job.
When to leverage outsourcing
In general, outsourcing is a good candidate for completing specialized tasks that require expertise outside of your domain. These are tasks that are often not a part of your core business and typically do not help you differentiate your product or end customer experience. When leveraged correctly, outsourcing partners help businesses gain “economies of expertise” whereby the business gains access to knowledge, skills, and experience quickly that is not otherwise immediately available in-house.
An outsourcing partner should also be leveraged if you believe that your outsource partner can provide “economies of scale.” In other words, the partner provides efficiency and effectiveness at a cost advantage when your business increases production. When considering outsourcing partners, their service should be offered at a lower cost at scale than an internal hiring strategy.
Benefits of outsourcing
As mentioned, outsourcing is beneficial for a particular subset of tasks. Below are a few caveated benefits of outsourcing:
- Valuable for specialized, infrequent functions: often, when a task is frequent enough, an internal hiring strategy may be deployed. If a task is highly-specialized but occurs infrequently, outsourced partners can be efficient partners.
- Can be cost effective: if the service is provided at a lower cost at scale when handled by an outsource partner, the solutions can create cost reductions.
Questions to ask when considering outsourcing
Outsourcing is not a solution for every task and should not be used for processes that can be automated or for tasks that provide business-differentiating value to your clients. If you answer yes to the majority of these questions, outsourcing is probably a good solution.
- Is this a task that can be done more efficiently and with greater expertise by someone outside of your business?
- Is there a disadvantage to taking care of this task in-house?
- Are the costs of the service lower than what it would be to take the task in-house or automate it?
Common candidates for outsourcing
- Functions involving compliance review
- Processes requiring a neutral third party such as voluntary audits
- Tasks requiring specialized skill sets that are not immediately available and part of the businesses’ core function such as design or finance
While outsourcing is a viable solution for many tasks, it’s important to consider how technology can help drive cost-effective efficiencies and quality assurance. To learn more about howQualia can help your business gain efficiencies through automation click below to schedule a time to chat with a Qualia Specialist.