Mortgage Software Solutions Blog

2018 Changes in Banking Technology Part II

blog pic 3Finance customers turn to mobile banking technology.

New technology continues to change the banking landscape.

For mortgage lenders, finance technology or “fintech” startups are competing to attract lending clients.

Smartphone-obsessed customers are more mobile than ever and the number of banking platforms has exploded. With 46% of consumers using only digital channels for their banking, the way that customers handle their finances is taking a huge shift.

Here are 3 more ways that new technology is changing the banking industry in 2018.

  1. Cybersecurity

Cybersecurity in the financial industry is experiencing a worldwide crackdown in response to infamous missteps in 2017.

Last year was rough. Large businesses from Uber to Equifax came clean with the public about record-breaking customer data breaches.

As a result, new regulations concerning finance-related cybersecurity have made it onto the books in the United States, Europe, and the United Kingdom. Stricter regulations even include naming and shaming in the public forum. For example, starting in 2018 the Financial Conduct Authority requires UK banks to publish data on how many complaints and security breaches they have encountered throughout the year.

Formerly held accountable by regulatory bodies within the banking industry, now financial institutions will be facing not only federal law but public opinion. With leaders like the EU, the UK, and the US taking the lead, other world markets are sure to follow.

High-tech options in identification and recognition are hitting the market as a way to shore up security. Biometric security and voice verification software are in development and beta testing. The new measuring stick for basic security begins at multi-factor authentication.

Mortgage lenders at any level would be smart to take notice and sort out their cybersecurity issues. The only other option is to risk having their name added to the growing list of internationally untrustworthy companies in the eyes of consumers.

  1. Mobile Investing

Another new technology on the market takes investment consultations out of the local branch and drops it right into the investor’s pocket.

A full 82% of 18 to 24-year-old smartphone owners say they use mobile banking exclusively. 

Feeding the demand for putting banking applications onto mobile devices like smartphones and tablets, fintech is making lending and investing more accessible than ever.

This new wave of mobile finance is letting millennial do-it-yourselfers have all the control by using plain language and visuals to explain financial terms. Bankers are replaced by explanatory screens and animations. Investment apps even let new customers dip their toes in the investing game by allowing customers to have a “practice run” before dealing with actual money.

Small-scale investment companies are reshaping the barriers to entry by allowing new investors to get in the game for as little as £250 in the UK. These game changers are coming about due to aims of open banking legislation strategies for reducing monopolies.

This new family of mobile investing apps offers greater control than traditional banks over their mobile-based portfolios, even allowing customers to pick and choose investment baskets based on trending labels like “socially responsible tech”.

  1. New Technologies

Beyond cybersecurity and innovation in mobile investing technology, there is a host of newly-developed niche finance technologies hitting the market.

Robo investing automates the risk appetite assessment process.

Full integration of voice assistants are popping up. Capital One partner Alexa can now tell customers their account balances and spending habits after a night out.

Though historically skeptical towards bitcoin and cryptocurrency, credit giant Mastercard changed their tune in 2018 and announced open support for virtual currency in the Asian-Pacific market.

It’s too early to predict which of these new technologies will have staying power and which ones just won’t stick, but they all have one thing in common. They all work on the basis of a hybrid platform that combines human and computer-based tools to carry out financial services.

These new integrations of technology into the banking world are already changing the way that consumers approach banking.

With 2018 is primed to be the year that tech saturates the finance industry, mortgage lenders and other traditional finance institutions have no choice but to take notice.

Join us at the cutting edge of technology with regulation-compliant cyber security, remote device access, and more. ABT equips mortgage lenders with the tools for success in a digital world.

Image: Unsplash

Topics: mortgage regulations mobile technology mortgage industry partnerships Consumer Finance Protection Bureau Compliance for Mortgage Companies Compliance Audit job opportunity Trump Administration Mortgage Lending

What Technology Is Changing In Banking For 2018

blog pic 4In the future, financial information and programming will be increasingly available on-the-go.

The old days of purely brick-and-mortar banks are over.

Mobile banking is the preferred platform as global smartphone use skyrockets and our preference for handheld interaction grows.

In 2011 only 10% of the world’s population used a smartphone. By 2018, that number has reached over 36% penetration.

From traditional commercial banks to finance technology or “fintech” startups, the banking industry is competing in an all-out sprint towards digital progress.

Here are 4 ways that technology is changing the banking industry in 2018.

  1. Open Banking

Open banking is a phenomenon being pushed by regulatory bodies around the world.

Lawmakers in the EU, UK, and the US have all passed legislation that takes personal financial data out of the hands of the banks and returns control to consumers.

The EU’s Payment Services Directives (PSD 2007 and PSD2 2015) will be fully implemented this year.

Together the PSDs regulate financial service providers by requiring transparency about consumer rights and the banks’ obligations to the public. They also require banks to free up customer data for third party access, limiting the power of the bank that gathered it.

The EU regulations coincide with the “Open Banking revolution” in the United Kingdom that intends to make banking more competitive for increased consumer protection. The UK also made it mandatory for all banks to provide third-party access to customer financial data using open API technology at the start of 2018.

In the wake of the Equifax data breach on the other side of the Atlantic, the United States made their move towards stricter regulations beginning in 2017 with the state of New York. US laws are focused on cybersecurity and consumer protection via speedy cyber attack reporting and increased government oversight of consumer data mishandling.

The proximity of these launch dates mean that traditional banks around the world face new technology-based limitations. Open banking and cyber security requirements leave the door open for tech-savvy challengers with a spotless reputation for safeguarding the public.

  1. RegTech

Another technology changing global banking in 2018 is regulation technology or “RegTech”.

RegTech is the umbrella term for software tools specifically designed to streamline regulatory compliance.

In the EU, RegTech has been using guidelines from the 2004 and 2011 Markets in Financial Instruments Directives (MiFID) as well as the General Data Protection Regulation (GDPR) of 2014.

Newly developed RegTech takes new 2018 regulations into account and eliminates duplication issues and insufficient data storage signposting.

Due to increased regulation, the adoption of these programs across the industry will determine which finance organizations move ahead and which ones get stuck hitting every legal bump in the road.

If implemented well, RegTech has the potential to significantly reduce risk, speed up compliance management, and control bank costs despite increased accountability.

  1. Robo Advice

“Robo advice” is the term for technology that does traditionally human jobs in investment banking.

In the past, investment managers evaluated a customer’s financial situation, communicated investment options, assessed risk appetite, handled portfolios according to client preferences, and relayed information about performance back to the investor.

Robo advice is the software and algorithms that provide these services digitally and accessibly on mobile devices like smartphones and tablets.

Millennials aged 22-37 prefer to work with apps and digital information over commercial banks. The demographic has a do-it-yourself attitude and shows an aversion to traditional banking institutions that have steered them into crushing student debt.

In fact, 75% of American millennials report trusting a financial product from a fintech company. Almost half of millennials in the US with investments report being aware of robo-advisors, while a full 11% currently use a robo-advisor exclusively.

With a frictionless user experience, robo advice may become the new norm.

  1. New Technology

In the UK, financial services newcomers are edging out traditional banks. Startup lenders like Iwoca in the UK are touted as the “future of small business lending” by using software algorithms to make credit decisions and having quick loan turnaround thanks to fintech.

By using all-digital or hybrid platforms combining human and algorithmic tools to reach customers, other digitally-native finance startups are slated to follow their lead.

Whether it’s anti-monopoly Open Banking APIs, intelligent RegTech software to handle compliance, or the growing preference for robo advice over human interaction, technology is making huge waves in the global banking industry this year.

As the digitally-native generations grow, traditional financial institutions scramble to expand their digital offerings while fintech startups flourish and join the market.

Join us at the cutting edge of technology with regulation-compliant cyber security, remote device access, and more. ABT equips mortgage lenders with the tools for success in a digital world.

Image: Visual Hunt

Topics: millennials cloud storage mortgage business mortgage regulations mobile technology mortgage industry Consumer Finance Protection Bureau Compliance Audit job opportunity cloud-based data Trump Administration Housing Market Mortgage Lending

Know Your Cyber Security Reporting Obligations

Know Your Cyber Security Reporting Obligations

New laws dictate how finance companies report security issues.

New York’s recent crackdown in state cybersecurity laws marks true reformation in the finance industry.

14 pages of detailed regulations fully outline the new accountability measures at Wall Street’s epicenter.

The regulations compel close to 10,000 financial institutions and 300,000 insurance licensees to put consumer protection before their corporate reputation for the first time in US history.

From a minor system access attempt by hackers all the way up to a full data breach, the new law saddles financial institutes with direct accountability to the state and implements a new standard in reporting for all mortgage loan servicers, banks, credit unions, and insurance companies.

For finance companies wondering how to conduct business in this new reality, here is a guide to the reporting obligations of New York’s new cybersecurity law

Governing Bodies

The first step of understanding the new obligations is to get familiar with the regulatory bodies of New York’s finance world.

The main authority on the new regulation is the New York State Department of Financial Services (DFS).

In the past, financial institutions were regulated via voluntary frameworks and reported externally to DFS in few situations with undefined parameters.

Under the new law, DFS established immediate authority by requiring a DFS-issued cyber security Certificate of Compliance as a basic prerequisite for operating a financial company. This gives DFS the ability to discipline non-compliant companies by revoking their certificate.

Beyond DFS, the regulation stipulates the creation of internal positions for officers to interface with DFS on behalf of the company. This requirement pushes aside ineffective industry-based governing bodies in favor of a direct link.

Mortgage companies must designate a Chief Information Security Officer (CISO) for in-house enforcement of company security procedures. The CISO reports in writing annually to the company’s board and will be held personally, legally responsible in the event of a breach at the agency.

Reporting Obligations

The final piece of accountability addressed in the new law is a reexamination of security reporting.

A “cybersecurity event” is any attempt of unauthorized access private consumer information. In order to mitigate the effects of a security event, financial institutions need to disclose data loss when it happens. This gives consumers sufficient time to take protective action such as changing passwords or putting a hold on a compromised credit card.

In practice though, finance companies endeavor keep data hacks under wraps. They prefer to save face and avoid losing consumer confidence.

In September of 2017, the Equifax data breach made international headlines. Though not the largest, it is considered the worst data breach in US history due to the sensitive nature of personal data that was accessed.

Despite being aware of the situation, Equifax spent five weeks running corporate damage control before disclosing the leak. The company initially underreported the number of affected consumers as 2.5 million instead of the actual 145.5 million people whose private data was stolen.

This failure to disclose the full extent of the damage infuriated the public.

Lawmakers vowed to protect consumers against this type of cover-up. With Sen. Elizabeth Warren (D-Mass.) at the helm, this is how the new regulations were written into law.

No More Cover-Ups

Now, the superintendent’s office places a strict time cap on security breach announcements. A company has no more than 72 hours to report any event that has a “reasonable likelihood of materially harming the normal operations” of the company. 

Since Equifax’s disregard for public safety, the law now stipulates that a data breach report is no longer the jurisdiction of the local supervisory body. Instead, reports of data loss go up the chain of command straight to the New York Superintendent’s office.

With a quicker turnaround time, consumers can be alerted quickly and efficiently through official channels about the breach.

Though basic requirements of the law have already gone into effect, the state of New York did allow time for mortgage companies to learn the law and implement it piece by piece.

According to the roll-out dates of the law, companies are required to be legally compliant with specific sections of the law on March 1 and September 3, 2018. The end of the full two-year transitional period and full compliance will be enforced by March 1, 2019.

For comprehensive compliance guidance and other cybersecurity solutions and, contact us.

Image: Visual Hunt

Topics: cyber security mobile security mobile device security email security cybersecurity security mortgage industry Trump Administration Housing Market Mortgage Lending 23 NYCRR Part 500 NYSDFS

Trump Administration’s Long- and Short-term Impacts on Housing Market

 

Trump Administration’s Long- and Short-term Impacts on Housing Market

The Long- and Short-term Impacts of Trump’s Housing Market Policies

Each time a new administration comes into office--whether the same political party or not--there will always be changes. Political leaders are not elected because they support the status quo, but generally because they want to shake things up. Their policy changes can often shift an entire economic sector, such as the housing market. President Trump’s new policies are already changing the borrowing and lending of mortgage funds.

As with political processes and policymaking in any country, some people will benefit and some will lose. There will never exist a one-size-fits-all policy. Here is what U.S. residents can expect going forward with Trump administration's changes/policies regarding housing.

Upholding the FHA's Annual Mortgage Insurance Premium

Lowering the mortgage insurance premiums is part of what Obama had been focusing on toward the end of his administration. Some low-income citizens, looking to purchase a home, were hoping to benefit from the enactment of that policy. However, the Trump administration has decided to suspend the mortgage premium fee reduction. What does this mean?

Short-term impact

  • When the Obama administration announced its plan to decrease the annual mortgage rate in early January, many lower-income individuals signed up, which caused a spike in FHA applications. With the premiums no longer being offered at a lower rate, many of these requests will either be withdrawn or rejected.
  • There will be fewer new FHA order applications as well as fewer FHA refinance applications.
  • The fee reduction, for FHA-backed loans, would have cut 0.25 percentage points of the total amount borrowed. Savings for Americans with a $100,00 mortgage would have been about $250, and for a $200,000 mortgage it would have equated to about $500 in savings each year. With the suspension of this fee cut, new homeowners will have to find other ways to save.

Long-term impact

  • The overall cost of owning a home will increase.
  • After a pullback of the housing market rates during Obama’s presidential terms, mortgage rates are expected to rise.
  • Affordability for low- to mid-income individuals and couples will decrease over time as the housing costs rise alongside housing demand.
  • Suspension of the rate cut of the FHA is indefinite, which may eventually help the FHA due to higher premiums and higher demand for housing.

Controlling the Consumer Financial Protection Bureau (CFPB)

Reformation of Wall Street practices is part of the reason the Consumer Financial Protection Bureau was created. The aspect of independence of this agency begs many ongoing questions. With the CFPB under the control of the new administration, its agenda will be determined by the decisions of current policy makers.

Short-term impact

  • Currently, there are claims that the body is unconstitutional. Even so, the president exercises control over the agency. The CFPB will not be used in the same way it was during the Obama administration, and as such, it may not act as an independent regulatory body.

Long-term impact

  • The issue of legality of the CFPB remains a court case at the moment, even as Trump's administration exercises power to control the housing sector through this body.
Home ownership has long been a part of the American Dream. While some critics believe Trump’s changes to housing will only make this dream more challenging for some, there are others who believe this cut will benefit taxpayers in the long run, especially if the country experiences another housing market crash as it did in 2008. Trump’s order to suspend the fee reduction will not affect current mortgage holders from making their existing payments, but it might prevent some people from taking the leap into home ownership. It’s important to note that even with a new administration and different policies put in place, there are other factors that affect the markets. For housing, this will always be tied strongly to supply and demand, home interest rates, and inflation.
Topics: FHA Trump Administration Housing Market Mortgage Lending