Value vs. ROI: A Banker’s Approach to Evaluating Technology

Mitch Woods: Welcome everyone to today's episode of Lending Made Easy. Today, Bryan and I are joined by a special guest. We've got Jeff Young here. He's the VP of Credit Risk Analytics at Security National Bank of Omaha. And Jeff, we're excited to have you on the show. Thanks for joining us.

Jeff Young: Yeah, thanks for having me today.

Mitch Woods: Could you tell us just a little bit about yourself and about your role there at the bank?

Jeff Young: Yeah, so I've been in banking for probably a dozen years now. Started in commercial real estate finance. I've done traditional CNI work as an underwriter. Now I'm working in credit reporting and software management for our credit solutions. So we talk about loan origination that's my passion today.

Bryan Peckinpaugh: Awesome, Jeff. And I always like to say I, I came to the dark side going from banking to technology. You went the inverse, starting in technology and and going into the banking side. So I think you're gonna have some great perspective for everybody here. I know you and I were talking the other day and just was kind of fascinated by one of the things you said as you were evaluating software technology.

And really wanted to bring you on and start there to talk about that. I think it'll be interesting for those that listen to the podcast, cuz you said that when you guys looked at your consumer LOS kind of addition, if you will, to, to what you were doing already for commercial, that you went into it knowing there wouldn't be an ROI.

And I think that's completely backwards to, to how a lot of our institutions at least talk to us about technology. Maybe you can, extrapolate on that a little bit. Like when you say, we didn't even think about the ROI, what'd you mean?

Jeff Young: Well, if you think about the complexities, especially in consumer lending, every day it seems like there's a new regulation that comes on. If you're just using Excel and Word documents, it becomes increasingly hard to track and manage that. One particular thing comes to mind is HMDA trying to manage, okay, well what's an application date?

When you talk about Reg B with timing rules, you're tracking all that information in Excel today. And it's extremely complicated. It takes a lot of time and effort. Our compliance team hates it cuz you know, it's, digging through paper files or drives of documents that aren't organized well, and to bring all that in-house to a single software solution where there's transparency and audit trail.

It's just a huge efficiency gain. You don't necessarily see an ROI from, we're producing more loans today than we did yesterday, or it might not necessarily take less time than it did previously. Ideally, as you hone your process in over time and you can integrate other third party solutions into your LOS. That's where you start to see an ROI on those investments as far as time savings. And some people might think if you're trying to become more efficient and save ROI, you're gonna cut staff. That's not the goal of anybody switching these platforms. It's okay, well, how can we retain our staff, make them more efficient to the point where we can grow our business and not necessarily have to add staff to do that.

Bryan Peckinpaugh: Yeah, absolutely. And we actually have talked on this podcast in the past. We at Baker Hill talked to it about, the idea of increased capacity, and it's just so hard to put a value on it because in theory, I could create a bunch of capacity for your team to sit around and watch Netflix in the middle of the day.

That's not gonna grow your business, that's not gonna move any dollars to the bottom line. But the software did create, The capacity to do different things throughout the day. I also love the transparency piece that you talked about and being able to see where all those things are, being able to manage and work your process.

Where are my bottlenecks? What do you see it doing to the I guess I'll use the word morale of the institution, right? I mean, cuz you, you talked about getting rid of spreadsheets, getting rid of these manual, monotonous tasks that nobody likes to do. What do you see that doing? Do you see that increasing employee satisfaction and, the experience they're able to give to the borrowers for SNB Omaha?

Jeff Young: Definitely, so it's foremost, the thing on top of everybody's mind is how do we enhance customer experience? And if we can have a process in place that is well-defined and transparent to the point where we know exactly what we need upfront, we're not going back to the customer multiple times to ask them for things that we should have had figured out previously.

And we can use the software solution to help us, guide us through that process, that have rules in place that tell us, Hey, you need this, and this, and you can't proceed until you have it. That increases customer satisfaction, which therefore, gets everybody excited that, well, now I know how to do my job.

My job is easier because I have these tools, assisting me in the process, rather than having to read through a bunch of paper procedures and instructions that are hard to find and hard to keep updated.

Bryan Peckinpaugh: Yeah, that's what we would expect but great to hear right, right from the front lines that, that, that is the experience of the financial institutions as they're putting these tools in place. So, question for you about the project and then a question for you about where you might want to go next.

So what was the biggest elimination of the manual efforts when you rolled out? And you can talk to this from just the broader LOS or specific to consumer, either way. But was there one particular area that you saw as, wow, that was where we really created capacity?

Jeff Young: Yeah, it's just time from data entry. It's, you think about if you're using Word and Excel and things like that to do your process. Well, if I have an Excel application, I have to key that information into my Excel application. If I have a, a Word doc that is a credit memo I have to send for approval, will I have to re-key all that information into the Word doc?

Well, now I need to somehow get that information into a document system so I can create my loan documents. Well, now I have to rekey it. So I mean, at a very high level, that's three places that it, same information's being typed three different times. So with a loan origination solution, well using an online application that's feeding directly into that loan origination solution, I never have to re-key the customer name, the customer address, their social, instantly it removes issues with data quality from, fat fingering a number somewhere along the line. Now that's the biggest time saver from an efficiency perspective. And today we're just using online application and the loan origination solution. We're still having to do some re-key on the home doc side, but think about what you can integrate from there? Well, initially when I kicked off this project about a year ago, I built a three year roadmap. In that three year roadmap the next piece is gonna be integrating loan documentation directly into that solution, loan origination solution. So, the information that's initially input by the customer on the front end flows directly into the loan docs without anybody having to re-key it.

And then another thing a lot of people don't think about is the documents that get emailed back and forth throughout this process. So if you have to have a customer send you a financial statement or proof of insurance or something like that, if you think about what that process without tools and other tools involved, a lot of customers might bring their tax return in and then you gotta scan it so it gets into a system somewhere.

Or they might email the lender a document. Well, now if with our application, we have a customer portal where they can log in, see everything that they need to provide us. And when they upload that, those documents through the portal, it follows that loan application through the process.

And then we can image it directly into our system of record, our loan imaging solution with a touch of a button without having to download it and then reimage it or scan it into a through the tools in the back room where we have a, a person that's a full-time staff member, all they do is scan documents I can think of a million things for that person to do.

Bryan Peckinpaugh: Yeah, right. There's a lot that we can repurpose some of these folks to throughout the process and that's, a great example of what you were talking about earlier on, Jeff of removing the redundancy as well. Cause with what you were describing, it's very easy to see where I, I might need a customer's financial statements for 2022 and they walked it into the branch yesterday, but nobody has scanned it yet, and the RM picks up the phone and calls 'em. That's not good customer experience, right? And having those tools, like you said, to have a singular view of these ideas across the organization so that, hopefully I know. What I requested through what channel and when it came in to eliminate some of that redundancy in chasing.

Nobody likes that, right? The RM doesn't like it cuz they, they feel like they should have known, the customer doesn't like it cuz Hey, I, why'd I go outta my way to go to the branch yesterday? So I, yeah, I could see that making a material difference to, to what you guys are doing. And sounds like a great next step with the docs, the integrated docs.

Again, just reducing, as you were saying, that manual rekeying effort in, into multiple systems or multiple places. So when you think about the docs, is that gonna be another quote unquote no ROI project or you think there's gonna be some hard ROI in that one?

Jeff Young: That one, there should be some hard ROI cuz we, you can pretty efficiently track the amount of time it takes to do that work. Whereas in a consumer loan application, it's, there's so many people that are touching that process, it's hard to say. And there's so many variables where it's hard to say this task always takes this amount of time.

But with a document imaging it's pretty well defined as far as how much time it should take and how much time we're spending doing that today.

Bryan Peckinpaugh: Absolutely. That makes sense to me. When you think about your bank, Jeff, and you were talking about the backend processes, creating this capacity, the idea being do more with the same, not do more with less, but do more with the same. Right. What do you think differentiates SNB Omaha in the market? What do you see bringing in that new business to, to take advantage of that capacity?

Jeff Young: I think all community banks like to pride ourselves on our customer service and knowing our customers. We're a little unique in the aspect that we have a very large private banking group. And wealth management that generates a lot of fee income for us. So like we do a lot of business with doctors and lawyers and manage trust and investments for those clients which has a lot of crossover to our commercial and commercial real estate line of business as well. So that's really where our business drives from, is those high income, high net worth individuals and the businesses that they participate in.

Bryan Peckinpaugh: Yeah. No, that, that's awesome. I, we certainly hear that. But you know, from a lot of clients, but I think with SNB Omaha, there's no doubt right, that you guys provide some fantastic customer service to the broader Omaha area and the footprint you serve. And when you think about the non-ROI ROI, a lot of what we've talked about so far, freeing up people to spend more time with the customers, providing a better experience to the people, engaging with the clients, allowing them to provide the same experience outward. Having that customer 360 view that you talked about, those all seem part of that soft ROI of an origination system deployment.

So I think all of that lines up. It makes a ton of sense. So I think it's maybe safe to say, Jeff, as we, if we talked, it started out with maybe that controversial statement of no ROI whatsoever. But really I think it's a shift, right? And how we think about ROI, so often in our industry, we try to look at the hard numbers, right? What, how am I going to eke another couple basis points out of a rate, or how am I gonna eke another couple dollars out of my loan fees or my margin, right? And maybe that's not always the right way to look at it.

And if you were to talk to somebody who's evaluating a software purchase today, and maybe educate them or push them towards how to think about these soft ROI ideas what would you tell 'em?

Jeff Young: Well, you gotta think about the bank as a whole and what are the strategies of the bank? Is there growth in mind? Is there new markets in mind? For example, we're getting into two new markets right now. That's something that would be extremely hard to do, and manage if we don't have our processes in place and there's not transparency into,the activity that's going on in those new markets cause they're remote. We don't have full-time backend staff at those places. There's essentially satellite offices. So having that transparency through software really helps drive those strategic visions.

Bryan Peckinpaugh: That's great insight, Jeff. Really appreciate your thoughts and view on this, cuz I know it is a different way to think about a software purchase than putting together an Excel spreadsheet that just has a hard dollar at the end of the day. So hopefully we gave some people different perspective and some things to think about as they evaluate their software purchases.