Bet on Innovation to Survive
June 20, 2019
By Tony Franco
2018 was a boom year for the real estate industry. This statement seems counterintuitive until you look at what has happened over the past year from a technology and innovation perspective. Just as a rising tide lifts all boats, a growing problem raises the level of innovation and investment for an entire industry. In recent years, tech developers and the private investment community have turned their eye toward addressing the inefficiencies and outdated processes plaguing the mortgage and title industries. However, just like the tide, the housing market is cyclical, and as we start to see a decline in the industry, we are also going to see which technology companies will stay afloat.
Across the board, industry experts are predicting this will be a down year for the housing market. However, that does not mean it is going to be a down year for technology or innovation within the industry. The down market will certainly impact other players in the title space negatively, but it will also cause companies to look more closely at their investments in technology and attempt to drive down operating costs while increasing productivity.
This creates an opportunity for companies to be creative and innovative in adding efficiency to the title industry. After all, necessity is the mother of invention. The same will ring true for the title industry for the rest of the year. By increasing efficiency in title operations, some market players will not only fare fine in the down market, but will actually prosper.
One challenge that continues to threaten the real estate industry is wire fraud. Some are surprised to learn that title wire fraud attempts are up 11,000 percent over the last two years. The problem is serious and significant, and in 2018, regulators started to take notice. For example, the Federal Reserve Board is currently considering adding a payee matching requirement for wire transfers, among other ideas, to combat wire fraud. However, criminals will always move faster than the wheels of government, so it’s up to title agents and their partners to adopt innovative solutions to address this ongoing and growing threat.
Of course, wire fraud is only one example of how technological transformation can help the real estate industry address some of its biggest challenges. Historically, innovation has been slow in coming, especially on the title side of the transaction, but today’s title agent has much to gain by becoming an early adopter of some of the tools and platforms now at their disposal.
Technology can give title agents a significant advantage over their competition, which becomes crucial to withstanding a down market. The ability to gain market share while others are declining is the best-case scenario any company can hope for, and forward-thinking title agents will want to invest in solutions that will drive down costs and improve efficiencies.
More specifically, technology adoption could force an industry shift. In 2019, tech-savvy title companies are going to start to pull away from the pack, and the industry could see market share among insurance underwriters change as a result.
However, over the past year, there have been several technology entrants into every single section of the real estate industry supply chain, and it’s still yet to be determined who the winners and losers of this fintech boom are going to be. In terms of title technology specifically, the new market entrants that succeed will be those that are focused on enhancing the industry, rather than those seeking to remove or replace parts of the industry. The real estate transaction is simply far too monumental and complex to completely eliminate the human element, and tech companies that try to do so will ultimately find themselves on the losing end of that bet.
It is a widely accepted notion that one cannot move forward without looking back. With 2018 firmly in the rearview mirror, title agents and other real estate professionals now have the opportunity to evaluate the wealth of technological innovations that have arisen over the past year and determine which solutions will help them best address their needs going forward. As the industry moves into 2019, anticipating a down market, the decisions made about where to invest in technology could be what ultimately helps keep the ship afloat in the stormy waters ahead.
Tony Franco is CEO and co-founder of SafeChain, a provider of wire fraud prevention software for the land title insurance industry. He can be reached at tony@safechain.io.
Contact ALTA at 202-296-3671 or communications@alta.org.