Spreadsheets costing mortgage providers more than they realize

The financial services industry has finally embraced some drastic technology-led changes over the past few years. Financial service providers across the world are prioritizing digital transformation and, along with it, innovative tech-driven initiatives to improve customer experience, increase efficiency, reduce cost, and demonstrate regulatory compliance.

But for many, the back-office is still starved for technology. Even companies with clearly defined strategies to innovate still resort to the old standby: spreadsheets. Many CIOs and IT teams are stuck slapping lipstick on legacy systems, leaving front- and back-office staff to rely on the de-facto fall back of emails and spreadsheets to support the business.

Sure, spreadsheets are a great tool that most teams are comfortable using, but they’re also highly inefficient, prone to errors, and time-consuming.

According to a study conducted by Forrester Consulting and Incisive Software, many corporations overlook spreadsheet vulnerabilities, and in doing so, expose themselves to financial and reputational risk. What’s more, a third of the mid-to large-size North American businesses report using 10,000 spreadsheets on a regular basis. Research shows that close to 90% of spreadsheets contain errors, and approximately 50% of spreadsheets used by large businesses result in material defects. What does that mean for companies that regularly rely on thousands of spreadsheets, especially when 1 in 5 large companies suffer financial losses as a result of spreadsheet errors?

Relying on the most meticulously-maintained spreadsheets or employing the most experienced Excel users isn’t enough to protect against the risks. Something as simple as a missing negative sign, mistyped parenthesis, or a cut-and-paste error can result in a billion-dollar consequence. In fact, these 11 companies experienced the colossal risks of spreadsheet errors first-hand.

Expecting financial service providers to forego spreadsheets altogether isn’t entirely realistic, but at what point will the financial and reputational risk outweigh the fear of changing the status quo?

If your back-office relies on spreadsheets because of outdated legacy technology, consider these reasons for finding a better way to manage your data and processes.

Limited visibility

Financial service providers manage a ton of data, especially when it comes to loans. Adding loan data in a spreadsheet means burying important information every time the loan is visited. Spreadsheets make it nearly impossible to see the loan history, anticipate the future of the loan, and see issues before they arise. They also don’t offer the functionality to record the reasoning and explanation behind updates or manual overrides. Spreadsheets leave lenders in a time-consuming game of catch-up; sorting through fragmented and disparate data takes time, manually reviewing each cell for errors can take days, even manually adding new data can take hours. Given the sheer volume of spreadsheets within financial organizations, it’s impossible to meticulously manage each one while maintaining visibility into who’s working on them, how many people are working on them, when something changes, what changed, and who made those changes.

Limited collaboration and tracking controls

Let’s face it: spreadsheets were designed for individuals, not teams. Only one person can access and input data at a single time. Loan spreadsheets require multiple users, making it difficult to keep track of all the files, which party is updating them, where they need to go, and which version is correct. Sharing spreadsheets through a network isn’t helpful either, because multiple users may be downloading and uploading data at any time. Spreadsheets also lack any built-in audit tracking function. You cannot set role- and user-based privileges to control who can see and edit the information. This ability is important because tracking and recording processes are necessary for maintaining detailed audit trails required by regulators.

Lack of speed and workflow improvement

Financial services rely heavily on spreadsheets, and many teams build processes and timelines around them. This is problematic when the lack of speed, versatility, and productivity impacts the bottom line of your organization. Spreadsheets affect the time it takes to close out a loan because they require manual, redundant tasks that take time and careful attention to detail. Updating or changing data is also time-consuming and prone to errors. For example, when updating loan variables like interest rates, spreadsheets require all changes to be made manually on a loan-by-loan basis. With any volume, this becomes unmanageable. Because spreadsheets are meant for calculations, not workflows, they also impact front- and back-end conversations and processes for getting loans ready. If another W2 is needed, employees must pick up the phone, send an email, or attach another spreadsheet, all of which impact the time to close the loan.

Human errors impact data integrity, or worse

With multiple users working on the same spreadsheet and using the same data, it can be very easy to create duplicate document versions or make calculations containing erroneous data. If lenders care about the security of their borrowers’ data, sending spreadsheets flying around the office isn’t exactly safe. What happens when an employee mistypes an email address or sends highly-sensitive spreadsheets to the wrong person? It’s shockingly easy not to notice when the recipient line auto-fills a person with the same name, or worse, actually sending borrower data to a person outside of your organization. When processes require employees to ad hoc type in borrower information, errors often go undiscovered until much later in the loan processes. When data is added from multiple documents and employees, the process of tracking down errors is arduous and time-consuming. Human errors can do real damage to your productivity, especially when employees spend most of their workday collecting, validating, and adding data to spreadsheets. More human-centric processes leave multiple chances for typos or miscalculations, resulting in a potential financial loss or your business’ reputation.

Delayed and messy reporting

Spreadsheet-based environments can make data extraction and consolidation a time-consuming process. Summarizing information to help make decisions is complicated by the need to double-check data for errors to maintain integrity. Being able to clearly see how many loans are insuring that day or that week is extremely difficult to do using spreadsheets. Overall, spreadsheets create delays and inflexibility. Employees cannot rely on spreadsheets to quickly find any data at any time for any specific time period, meaning real-time data is not readily available to those who need it.

Costly and unscalable

The upfront cost of spreadsheet software tends to be minimal. Some options, like Google Docs, are available for free. Other application licenses for programs such as Microsoft Excel cost very little. While the initial price tag for spreadsheet software is low, there can be high hidden costs associated with these solutions, including problems with security and data integrity, lack of user permissions, complicated reporting, and inefficient workflow capabilities. The mortgage industry needs tools that don’t impact productivity, consumer privacy, or competitiveness in the market.

Lack of security controls

According to infosec teams, downloading data to a spreadsheet is one of the largest security risks. That’s because the lack of security controls within spreadsheets make them vulnerable to manipulation. Documents created with these programs can be easily corrupted and are susceptible to fraud. Malicious parties can easily change values, dependencies, and formulas without being found, making organizations vulnerable to financial losses and other serious liabilities. The average data breach costs companies $3.86 million, which is why many suggest moving sensitive information and systems to a cloud provider.

Because the mortgage industry is in a constant state of flux, systems and processes must be adaptable and configurable to maintain productivity and data integrity. CIOs and IT leaders are demanding software products that drive insight based on a single source of the truth and provide greater collaboration, integration, and automation.

Luckily, IT leaders have discovered a fast and cost-effective way to accelerate software delivery and take full advantage of automating back-office processes—replacing spreadsheets entirely. Learn more about the financial services tool that’s driving more than 50% improvement in productivity and customer service, making other mortgage lenders wish they’d discovered it sooner.