Technology Evaluation: Tech Stack Or ‘Franken-Stack?’

EXIN S3 E2 | Tech Stack

Guess who’s back? Fintech evangelist Sue Woodard joins Joe Welu here in Expert Insights studio again, this time to discuss how banks and lenders evaluate their tech stack in today’s macro environment. Sue shares the biggest pain points of lenders in choosing and implementing the right technology, the key components lenders miss during the process, how tech providers can be seen as more than just another vendor, and more! Tune in now to know if it’s all tech stack or “franken-stack”!

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Technology Evaluation: Tech Stack Or ‘Franken-Stack?’

Sue, thanks so much for stopping by the studio again. I want to talk a little bit about how banks and lenders are thinking about and evaluating technology in this environment. Considering the macro environment that we’re in, what are your thoughts?

Certainly, everybody reading is very well aware of what the macro environment is with so much of a decline in terms of production, profitability, and everything else. It’s been very interesting having had the opportunity, particularly, to talk to a lot of lenders and to hear their very open dialogue about how they’re looking at technology and some of the decisions they’re making now.

Give us a little context. When you say you’re talking to companies, and you’ve been in the industry so long, you’re so well-respected. You’re not just having conversations with friends, which I’m sure you are as well. These are formal settings where C-level executives are going deep into how they’re thinking about it to give some context.

In some of the workshops that I’ve been in, some of the meetings, some of the round tables, I’ve got the ability to hear very directly what lenders are saying. In fact, not too long ago, I had the opportunity to sit on a panel at The Mortgage Bankers Association, talking about the ROI of technology. It’s very interesting. I’ve been on both the lender side, as well as on the solution provider or vendor partner side.

There are times that it’s interesting. I feel almost like a mediator or counselor sometimes to be in the middle because I hear these things from lenders where there is another perspective that is from the vendor side, but I don’t always know if the vendor solution providers hear the unvarnished things that sometimes I do.

EXIN S3 E2 | Tech Stack

It’s helpful always to get that perspective. One of the things that we talk about internally as a company. As a technology provider that serves so many of these organizations, the empathy, and understanding you have to have for what’s important to them. How they’re thinking about the business and the problems they’re solving is more important than it ever has been. What are some of the top bullet points that are coming up when you’re having these conversations?

One of the key things right now is everyone is re-evaluating their tech stack from top to bottom. They’re looking at it from the lens of cost-cutting. “Is this still making sense for us? How would we know?” I’ve heard people tell stories about anything over $5,000. The CEO of the company’s looking at it saying, “What is this? What are we getting out of this? Is this bringing us, new customers? What is this doing for us?”

EXIN S3 E2 | Tech Stack

What are the outcomes?

Some of the pain points that I hear people talk about is they start to look at things and think about some of who their technology partners are. Some won’t be a surprise. Probably none of these will be a surprise to many of your readers. Integration is the number one thing that I hear people talk about. I heard an executive call, their tech stack of Frankenstack. I thought that was such a great term.

It is a great term. Not a great result, but a great term.

No, but it is the result of this journey that we have been on in the mortgage industry where I remember when it first was the digital revolution was coming to the mortgage industry. We’re going back many years.

We’re going to replace all humans.

Yes, and it’s like, we won’t need anything.

AI is going to replace underwriting.

It was interesting because, at that time, people were talking about, “We want an end-to-end solution. We’re going to get everything from one provider.” Pretty quickly, people moved back away from that and the promise made to the lending community was, “We’ll all API together and it will be magical and it will all work out right.”

Lenders have looked at that and it’s probably the chief frustration point. Again, it’s certainly not a surprise to you or any of your readers. I do think it is something that bears some significant attention in the vendor solution provider community to figure out what is going to be the solution for this. As they’re looking at these solutions that are Frankenstacked together to some extent, it’s creating a lot of internal inefficiencies from a solution that should be efficient.

It becomes bloated. When we look at the tech stacks that we’re a big part of in a lot of companies, and you start unpacking it, the more complexity that you have with your stack, the less nimble you are in many cases. If you want to implement new things and new strategies, you want to course-correct on something. If your tech stack isn’t configured in such a way that you can do that efficiently, particularly now as resources are even more precious than they ever have been. Maintaining all of these different things is hugely burdensome.

Every time I hear one of these things, I hear the pain point. There’s another side to it as well that I would say. Very often I would tell the lender, “You’ve got yourself a Frankenstack.” However, I would ask the question, “Did you take all of the best practices, though, from the vendor when they said, ‘Here’s how we need to integrate, and here’s how the data should flow?’”

“Did you force an old workflow or an old way of doing things because we’ve always done it this way and we have to keep it this way? Did you try to make that technology do something?” It doesn’t work like that. Along the same lines, one of the things that I hear lenders will complain about is, “A vendor will come to us with an ideal state. We’re going to operate in this little precious sandbox environment and that’s going to be what we can expect.”

A lender’s looking at it, saying, “I am like operating a spaghetti factory and you’re talking to me about something that is supposed to work in this perfect pristine way.” That’s a good message. I know you’re so familiar with this. As you talked about having empathy for the spaghetti factory that a lender sometimes can feel with all of these different things going on. The smart vendor partners are paying attention to, “How do I fit into the real deal, real life, and not this little pristine environment that doesn’t actually exist?”

EXIN S3 E2 | Tech Stack

What’s the value being delivered?

I’m glad you said that because that goes to the other big pain point that I hear people talking about is real-life ROI, whether that is something that is customer acquisition, profitability, or cost savings.

It could be employee retention.

It could be any measure of different things. There are two sides to this. There is a burden and a responsibility on vendors. The smart vendors are paying attention and saying, “Here is exactly how we do it.” It’s hard to do because the market’s moving in the background. That’s one of the toughest parts about proving out ROI. You’ve got interest rates changing and all kinds of other things happening in the business.

You have to get pretty clear about, “Here’s exactly what we do and how we’re going to do it, and here’s the outcome.” However, I would tell the lenders, “You also need to be real clear about what success looks like and know that there are things that are sometimes intangibles.” I heard an executive say that one of the reasons that they’re investing in some technology right now is morale. He said, “My loan officers have been asking for this, and we’ve been saying no. I need this for their morale and for recruiting.” Yes, it’s going to do other things for us, but I’m not going to discount the fact that this is going to help me recruit and retain. It’s going to help lift people up at a time they need it.

EXIN S3 E2 | Tech Stack
Tech Stack: Lenders also need to be really clear about what success actually looks like and know that there are things that are sometimes intangible.

I need happy, motivated professionals that are engaged and want to get up and leverage the tools that we have. Certainly, there are things that sit on the shelf and don’t get leveraged. I can only speak from my perspective, but I hear a lot about, “We went into this period of everything modern that is new from an innovation standpoint. We’re going to buy everything.”

“We’re going to remake the digital customer more, the application process, and the whole loan manufacturing process. We’re going to rebuild CRMs, customer journeys, presentations, and all of these things.” They bought and layered on top of tools. You would have a better viewpoint than I would at this juncture. It feels like people are saying, “Let’s unpack and peel off some of those layers that are not clearly unlocking value. Is that what’s happening?

Absolutely. In many cases, some of this will continue to happen over 2023 purely because of M&A activity. Where there are things coming in because it’s part of what they’re getting when they’re acquiring, whether it be organically or through an actual transaction. A lot of that happened in 2022. In some cases, people didn’t mean to create these fractured things.

Now is the time that I’m hearing very smart lenders say, “We’re going to take all of this pile of stuff.” In some cases, they were going to do a champion challenge of certain technologies inside their business. They’re going to peel off the one that does not make sense because they do need to have something streamlined. They need to have fewer vendors to work with and they’re going to lean into the vendors that they’re working with, where they’ve got a strong partnership. They are going to carve off some of the things and deal with that change management internally.

It’s certainly a challenge to all of us on the technology vendor side. We think of ourselves as a partner much more than a vendor. It’s a challenge for us to be able to come up with an approach, a point of view, and ways to deliver value that are super clear. If you don’t have a clear path to unlocking value, it feels like it’s going to not be a kind environment for those technology companies in 2024.

I think you know I was a Judge at Digital Mortgage for the eight-minute demos, which I’ll never do again. It was hard to do. I don’t love judging somebody presenting in front of a sea of potential customers. I was a little uncomfortable.

Did you feel bad about criticizing some of them?

A little bit, but I tried to play it nicely.

You covered it up well.

I wanted to give some valid feedback. The biggest feedback point, if I had to judge the whole thing, is that there were a number of people that I could tell had been refining their pitch for a long time, a completely tone-deaf pitch for the market that we’re in currently. I heard a lot of people talking about things. As I said, I admire anybody who can get up on a stage and present on live software. That’s hard.

When I was listening to the pitch, it was more knowing, “This isn’t a result of that. You’re standing here on stage. This is your actual pitch and it’s something that would’ve been perfect in 2022. It’s completely not right for the market that we’re in right now. Do you want to upset a lender? Go ahead and make it real obvious that you’re not paying that much attention to the serious pain that you’re in right now.”

Interestingly, to shift gears for a second, I have been doing technology insight studies at STRATMOR. When people talk about the hardest part of implementing a technology or getting everybody onto one, or whatever that is, the 100% number one thing all the time is change management with loan officers. It’s the hardest part with sales teams.

Change management and user adoption is the top thing that we hear consistently. I’m very passionate about that topic. It is something where I can say there is work needed on both sides. I go back to my analogy of being a mediator, bringing both the vendor partners together as well as the lenders together. There is work needed on both sides.

That’s well said. We spend a lot of time looking internally at how we can get better and what things are needed to do to improve the value we are delivering. It’s true in the sense that you’re only going to get the outcomes if, as a lender, you’re setting your organization up for success. You’ve removed the blockers. You’re removing unneeded complexity. The value of the things that you’re doing is very clear to the field or the stakeholders that are using those tools.

EXIN S3 E2 | Tech Stack

From the lenders that I’ve heard their perspective. I tell the solution providers or technology vendors, “You’ve got to stay in the game with them. Understand they are running a lot of different things going on, not just what you do. You have to think about your place and come alongside that lender. Right now, specifically, come alongside that lender with the resources that nobody knows.”

For example, Total Expert. Better than all the people at Total Expert to point. That’s why you’ve got an investment in engagement resources and things like that. What I would tell the lenders is a couple of things. When you are implementing technology or carving off one solution, getting everybody on one, there’s a very key thing that lenders sometimes miss. One of them is what you just said. You have to know what outcomes you’re looking for and be very realistic about it.

What does success look like?

How will we know when we get there? What outcomes can we expect to have? Where did we start? Sometimes people don’t have a baseline of where they started with knowing when they’ve made a motion on it because they don’t know where they started.

Sometimes people don't have a baseline of where they started with knowing when they've made a motion on it because they don't know where they started. Click To Tweet

That’s such a common mistake. We’ve made that mistake many times. We go in and make a ton of progress, but something’s disconnected there. Generally, you didn’t quantify and clarify exactly where you were in terms of the current state. If you can’t do that, then it’s difficult to measure the progress.

It’s one of those places where lenders and vendors need to come together better. Once lenders know what those outcomes are, they need to be open-minded to thinking about, “Maybe there’s a different way of getting there than the way that I am used to doing it.” It’s one of the wonderful things that a lot of great vendors bring to the table. You work with some of the best logos in the entire industry. “Here are the best practices. Let us give you those best practices.” That’s a gift, but you have to be willing to look at those and institute those into your own organization.

One of the other pieces that I’m passionate about this particular point is leaders in the lender organization need to lead and stay engaged. In fact, Len Tichy who’s one of the Partner Emeritus at STRATMOR said it was the number one thing that he would see if technology was going to work or not inside of an organization. He said it was almost less about the technology than it was about the leadership team that was going to be executing.

That’s a profoundly true statement. I’ve always believed it’s the combination of talented, passionate, engaged people and technology. If you have one without the other, you don’t get the outcome.

The best is when you have an A technology and an A team. He said, “We’ve seen A teams be able to make a C technology work. We’ve never seen an A technology work great when it’s being put in place with the C team.”

Well said. Sue, thanks for providing your perspective on some of those technology discussions. I look forward to doing it again, soon.

Thanks for having me. See you.

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About Sue Woodard

EXIN S3 E2 | Tech StackAlong with her signature passion for people, Sue Woodard brings over thirty years of financial services and fintech experience to her roles as an independent consultant, Senior Advisor to Total Expert and the STRATMOR Group, and industry “Evangelist At Large!” Sue started her career at the ground level in financial services, became a top-producing mortgage loan originator, then leveraged her knowledge to become a highly acclaimed industry speaker, subject matter expert, and fintech executive.