LOS in a box?

I recently read a news flash about Black Knight Financial Services (BKFS) launch of "Empower Now!" a new version of its enterprise LOS product (Empower) targeted towards regional and mid-market lenders and independent mortgage bankers.

The idea of a "Bank in a box" has been floated around by many banks, especially global franchises with a vision to offer a banking/cards solution with a global core, regional cores and country-specific customizations, interfaces and reporting. Over the past few years, the mortgage industry has been trying to solve for this in its own way with a view to speed up LOS implementations and reduce the cost!

As any of us who has been around in the mortgage industry has painfully realized, LOS implementations are time-consuming and expensive. The Empower Now! version attempts to address this challenge by offering a pre-configured, scaled down version of the Empower LOS with a standard set of interfaces to get it up and running in 45 to 90 days, with the ability to extend the configurations and customizations at a later date! Black Knight LOS Targets Regional, Mid-Market Lenders.

The idea in itself is not new and has been attempted before by a few LOS tech firms. While the approach is compelling and simple, many industry participants are keen to observe the successful outcomes of this approach taken by BKFS.

Experience tells us that any LOS implementation has to overcome the following large roadblocks (among many many other ones!) in order for it to be successful:

a. Workflow - One of the key goals of any LOS implementation project is to "transform operations". However, even if an LOS tech product offered an "out of the box", "best of the breed" workflow, lenders like to retrofit their existing workflow into the new system rather than change their operations to suit the target-state workflow and operating model. The process of drawing out business process maps, defining activity sequences, role-based security, event-based triggers etc take an enormous amount of time and effort. The challenge is compounded on account of multiple iterations between different departments at the lender and sub-standard workflow engine capabilities built in LOS tech products.

b. Third party integrations - While many LOS products come with a pre-built set of integrations to industry-standard third party service providers (Flood, Title, Appraisal, Doc Prep, Imaging, Tax etc.,), many lenders have existing arrangements with other providers to which the LOS product may not have integrations with. This introduces additional efforts into the project to build out new interfaces to these service providers. There are often challenges in coordination between the two vendors (LOS and service provider) and the project managers at the lender's end have to "herd the cats" to get the integrations moving!

There are many other challenges besides the above two, such as evolving compliance changes and each lender's varying interpretation of how they would like to implement an upcoming compliance change, reporting requirements, user acceptance testing, roll-out strategy, end-user training, productivity considerations etc. However, as it relates to a 'Zip' or 'Compressed' version of any LOS roll-out, the above two clearly stand out as big roadblocks that need to be addressed in order for it to be successful.

BKFS states that these will be addressed by using its other set of solutions such as

• Loansphere Exchange (formerly RealEC) - an integration hub connecting the LOS with service providers in Appraisal, Closing, Credit, Fee, Flood, Doc Delivery etc. For the list of services, click here. BKFS owning and maintaining this exchange takes away the headache of lenders having to maintain their point-to-point payloads with dozens of third party service providers.
• Black Knight Motivity - mortgage BI & reporting solution comes with a pre-built set of KPIs and reports.

With LoanSphere Exchange, the Empower Now! product comes with a pre-built set of integrations to a large number of third party service providers. It remains to be seen if the lenders in the target market already use these service providers, or are going to want to build integrations with service providers who are not on this platform. On paper, it appears to be a simple trade-off, but it is far more complex!

The Empower product has so far been used at large, national lenders who have far more complex workflows than regional lenders or independent mortgage bankers. It is not clear whether BKFS will offer a standard set of workflows as best practices or offer an extremely flexible workflow engine that allows every lender to define their own workflows. As BKFS goes downstream to mid-market and independent mortgage banking segments, this becomes even more critical as the workflows are quite different from the large banks!

The success of such "pre-configured" solutions will be defined by whether will lenders agree to "prescriptive" approach or prefer to have a "descriptive" approach to their vision of operations transformation!

As an industry participant and as a battle-scarred warrior in the mortgage & banking/financial services industry, I wish BKFS success with this approach.