The Difference Between Mortgage Brokers and Loan Officers

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If you’re in the process of finding a new mortgage company whether you’re looking to refinance or buy a new home you may come across two terms that seem interchangeable but actually aren’t. The terms, mortgage broker and loan officer, both refer to individuals who work in the mortgage industry. However, there are some differences between them.

Spotlight

LaSalle Investment Management

LaSalle is one of the world's leading investment managers. We build long-term and trusted relationships with our clients – wherever they are and wherever they invest. We are focused solely on one asset class: real estate. This enables us to deliver competitive investment performance, along with the highest levels of client service. Our diverse client base consists of more than 400 investors across the globe, including pension funds, insurance companies, sovereign wealth funds, endowments and individual investors. LaSalle has rich heritage spanning more than three decades, and now boasts more than 700 employees in 24 offices across the globe, with approximately $64 billion in private and public real estate property and debt investments (as of Q4 2018).

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How Banks can use Artificial Intelligence to Constantly Innovate at Scale

Article | April 6, 2020

The world is digitizing, and the world is digitizing because we’re seeking low friction and immediacy. We want immediate responses; we want stronger commerce connections that can scale up to more rapidly. So, within that framework, one can’t expect banking and financial services to stay the same as it has been, because ultimately it has to shift. Artificial Intelligence is bubbling with a lot of energy at the moment, and so is Fintech. There has been a lot of investment going on in it, and it’s under so much spotlights. The rate of innovations and the abundance of new technologies have sprung up everywhere. Things from artificial intelligence, peer to peer lending, big data, block chain, crowd funding, digital payments, and Robo advisors, just to name a few. We need to think about FinTech with two capitals T’s that is, TECHNOLGY and TRANSPARENCY. It’s more about technology, enabling the banking industry to do the wonder, and Transparency because it’s a sector where customers can make much more informed choices. But what has made Fintech go so unmask is just the pace of innovations in this space. FinTech has now moved from prevention to resilience. We are just at the tip of the iceberg. Globally, the value of an investment in Fintech companies amounted to approximately 112 billion U.S. dollars in 2018, which was a record high for the sector. The annual value of global venture capital investment in Fintech companies is increasing and doubled between 2017 and 2018. This is an industry that is hungry for change because the consumers are hungry for change, and so the big corporations, the incumbents are also ready to change. Consumers want seamless, frictionless experiences. They want all the pain points removed from their banking journey. Table of Contents • Artificial Intelligence- Paving the Way for the Future in Banking - Embracing Conversational AI in Banking - Driving Personalization in Banking through Artificial Intelligence - AI-Model for Automated Credit-Scoring and Loan Processes - Transforming Wealth Management with AI - Utilizing Robotic Process Automation Software in Banking • In Conclusion Artificial Intelligence- Paving the Way for the Future in Banking Artificial Intelligence has the potential to revolutionize how consumers and businesses handle financial transactions. There will surely be hits and knocks along the way, but AI is not going away anytime soon. It is the future. FinTech companies want to deliver personalized and cost-effective finance products. To do so, they need to utilize large numbers of data from various touch-points. Introducing the financial sector with advanced techs like big data, artificial intelligence, and blockchaincan facilitate banking and finance go far beyond cashless payments and mobile services toward personalized customer experience that will transform FinTech in 2020. Financial institutions now know their customers' behavior and social browsing history. The accelerated rise of Artificial Intelligence and machine learning has resulted in banks being able to reduce the number of operations as they embrace the power of automation. Artificial Intelligence facilitates real-time omnichannel integration of these insights to deliver a personalized one-to-one marketing experience for their customers. AI’s potential can be looked at through versatile lenses in this sector, especially its implications and applicability across the operating landscape of banking. Learn more: https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/financial-services/deloitte-uk-world-economic-forum-artificial-intelligence-summary-report.pdf The three main channels where banks can use artificial intelligence to save on costs are front office (conversational banking), middle office (anti-fraud) and back office (underwriting). Let’s explore more on how banks can use Artificial Intelligence to constantly innovate at scale: Embracing Conversational AI in Banking An artificial intelligence feature that is redefining customer engagement is conversational AI. It has been viewed as a cost-effective way to interact with customers. Nowadays, conversational interfaces represent one of the biggest shifts in banking user interfaces to date and are modifying how they obtain and retain customers and enhance their brand identity. According to a study conducted by Juniper Research, chatbots can save at least 4 minutes of a customer service agent’s time. While saving 0.70 USD per query, in the process. Conversational AI has now become the preferred solution for productive customer communication among banks. The universality of messaging apps, like Facebook Messenger, WhatsApp, Slack, Microsoft Teams or SMS, and the adoption of voice-activated assistants such as Amazon Alexa, Google Home, or Apple’s Siri are bringing conversations back into our banking experiences. Conversational Banking Experience For example, the Swiss bank UBS partnered with tech giant Amazon to merge its “Ask UBS” service with Amazon Echo. Customers can communicate with multiple banking processes, via the chat interface, such as reporting potential fraud on their banking cards, applying for an increase on their credit card limit, or getting a breakdown of their recent transactions, and more. Driving Personalization in Banking through Artificial Intelligence Customers need banking on the go. They are looking for more personalized experience and expect to transact with banks from the convenience of wherever they are. Data advises that businesses that offer personalized services achieve far better business outcomes. Giving the right individual experience through the right channel at the right time can make banking more personalized. AI can play a significant role in assisting banks to understand customer behavior by leveraging transactional and other data sources. The Boston Consulting Group has estimated that a bank can garner as much as $300 million in revenue growth for every $100 billion it has in assets. All by personalizing its customer interactions. • Artificial Intelligence enables banks to customize financial products and services by adding personalized features and intuitive interactions to deliver meaningful customer engagement and build strong relationships with their customers. • Artificial Intelligence enables a higher degree of personalization and customization by tapping into information such as customer behavior, social interaction, and even health or important event dates, all to create a well-rounded picture of their customers’ profile. • AI can classify prospects based on financial capability, family size, etc. and offer tailored products. To carry out extensive personalization projects, banks are looking to collaborate. They’re now teaming up with fintech and software corporations to provide technological capabilities they do not maintain. In 2019, the total value of transactions in the personal finance segment will amount to $1,092,496 million according to Statista. Remarkably, the market’s largest segment is robo-advisors, with total assets under management of $980,541 million. In 2023, the number of people using robo-advisors is predicted to be 147 million. Organizations like Optimizely, Braze, and Crayon Data offer the financial sector the means to personalize the customer experience. Crayon’s proprietary AI-led recommendation engine, maya.ai, allows banks to create personalized digital experiences for their customers. All that with the help of machine learning algorithms. AI-Model for Automated Credit-Scoring and Loan Processes Artificial intelligence not only automates menial and repetitive tasks. It can be trained to take business decisions that normally require a specific level of cognitive thinking. Lending and credit scoring are the critical business for banks and directly or indirectly touches almost all parts of the economy. Banks always relied on models and experts to make effective credit decisions. Now models are becoming sophisticated enough to replace experts. Banks and credit scorers are employing machine learning models to track customers’ credit records. And make well-informed decisions on loan approvals. Banks and credit scorers are employing machine learning models to track customers’ credit records and data. And make well-informed decisions on loan approvals. The AI-based credit scoring model can score potential borrowers on their ‘creditworthiness’ by factoring in alternative data. The more data available about the borrower, the better you can assess their creditworthiness. This data could include candidates' social media/internet activity and websites visited and online purchases history. By examining the online behavior of a borrower, these models can predict the most credit-worthy candidates for loans. And also predict who is most likely to back out. In the new digital reality, AI-powered credit decision permits lenders to: • Fast and secure loan origination process • Automate borrower`s digital journey • Find and filter unfit borrowers based on sophisticated proprietary models powered by deep neural networks • Lessen the operational costs of origination • Authorize unhindered scalability of the lending business Transforming Wealth Management with AI Wealth managers are positively deploying artificial intelligence (AI) to answer the needs of a new generation of tech-savvy high net worth individuals. According to the 2018 Asia-Pacific Wealth Report (APWR) released by Capgemini, the APAC region witnessed a 12.1 percent growth in HNWI population in 2017, and a 14.8 percent rise in wealth, with the region, now forecast to exceed US$42 trillion by 2025. One of the AI trends in wealth management is the potential for the technology to move beyond traditional tasks, such as KYC and risk management, to new centers of enhancing relationship management and client experience. On the one hand, firms are investigating how they can make their relationship managers more productive. On the other, the new generation of clients wants predominant online services, assisting banks to examine how they can optimize their digital offerings. “Consumers’ and SME’s behavior and needs are changing fast,” said Rosali Steenkamer. There is an immense data explosion with structured and unstructured data. Only big data-driven models, Machine Learning algorithms and Artificial Intelligence can tackle this to serve the right solution to the right customer. Traditional technology is simply not able to deal with these challenges. -CCO and Co-Founder at AdviceRobo. Relationship Managers are not motivated to capture datasets. The only solution is to encourage the front office to collect new data, as well as collaborate with colleagues who develop AI-powered products and services. Doing this will drive productivity for Relationship Managers and an enriched experience for their end clients. Everyday tasks can be handled by AI systems, releasing wealth managers to concentrate on higher-level investment strategies. AI systems can also analyze client data to adequately create packages prepared for specific financial and social demographics. Utilizing AI in finance expands service offerings while also making them more customizable. With a variety of AI tools at their disposal, wealth managers are outfitted with the research and data insights essential to make quicker, more informed decisions for various clients. Learn more: https://capital.report/blogs/how-fintech-is-shaping-the-future-of-wealth-management/8244 Utilizing Robotic Process Automation Software in Banking This year robotic process automation (RPA) will continue to impact financial institutions, to help them be more efficient and effective, as well as help ensure they meet federal and state compliance requirements. RPA is growing rapidly. Recent RPA trends and forecasts anticipate that the market for robots in knowledge-work processes will reach $29 billion by 2021. For the banking industry, robotics outlines a unique and underutilized way to increase productivity while minimizing traditional repetitive and manual-labor-intensive processes. In Conclusion The accelerated rise of AI and machine learning has resulted in banks being able to reduce the number of operations as they embrace the power of automation. AI facilitates real-time omnichannel integration of these insights to deliver a personalized one-to-one marketing experience for their customers. So, when we look at these phases of development in the Banking Industry, we understand that it’s not just about inserting technology into banking; there is a larger shift here. Part of the shift is around trust and the utility of the bank. Artificial intelligence and machine learning technologies allows banks to turn vision into reality. Whether you are ready for it or not the AI revolution is poised to provide exciting avenues for innovations.

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Optimizing Risk Management With Machine Learning In Banking

Article | April 6, 2020

The enormous amounts of data accessible to banks and their high demand for forecasting make the financial industry a perfect area for machine learning (ML) to shine. In this article, we explore the current applications of machine learning in banking when it comes to risk management, define its challenges and provide a future outlook. Credit Risk Management For the past few decades, banks have mostly used logistic and probit regression models for credit risk assessments and internal risk management. However, all conventional models inherit the same flaw — they predict outputs based only on linear relationships between input variables. This limitation was exposed in the catastrophic 2008 housing market crash. Although the crisis’s negative consequences have been multiplied by uncontrolled sales of credit default swaps and other complex financial instruments, the fundamental reason for failure was in the inaccurate credit risk model. In the aftermath, with the intent to force financial institutions to provide more detailed reports, The Federal Reserve’s CCAR now requires banks to account for more than 2,000 economic attributes. Consequentially, this also led to other regulating authorities introducing new standards that improve supervisory data quality and reporting. At the same time, with the proliferation of banking apps, social media, and digital communication overall, financial institutions now collect lavish amounts of unstructured data. If gathered and processed correctly, these new datasets can help gauge critical insights for a wide range of banking operations. This is where machine learning comes into play. More advanced non-linear approaches to credit risk modeling including neural networks enable banks to make predictions with a previously unseen level of accuracy and granularity. Challenges The utter superiority of machine learning over traditional credit risk modeling approaches comes at the cost of the prevailing ‘black box’ problem. While we can decide to trust ML algorithms based on statistical evidence of their feasibility, current regulatory constraints won’t allow it to happen. However, machine learning can still be used to a great extent while being regulation-compliant. Even simple linear machine learning approaches still yield more accurate results than conventional ones. Many banks also use unsupervised machine learning methods to explore data, while using traditional classification and regression models to make predictions. Fraud Management and Surveillance Nowadays, the majority of banks’ fraud detection systems use rule-based approaches. This causes banks to deal with a significant number of false positives, forcing them to spend inordinate amounts of resources to distinguish meaningless behavioral deviations from real threats. The ability of machine learning to capture subtle trends and uncover non-linear relationships allows banks to get a complete picture of a client’s activity and significantly lower the probability of false positives. For example, by integrating ML into its fraud detection model, Danske Banks managed to reduce false positives by 60%. Challenges Similar to many other AI-based solutions in the financial space, the biggest adoption hurdles concern regulations and the unexplainability of AI systems. For example, depending on the jurisdiction, banks are often unable to provide developers with sensitive information related to past breaches. Next, the outputs of unsupervised monitoring systems sometimes can’t be explained, which makes them non-compliant. However, financial institutions have found a way to at least partly leverage the power of ML for fraud management. A fraud prevention system’s alerts will still be triggered by rule-based models, but the integration of an ML algorithm on top of them can allow adjusting surveillance methods to a person’s behavior fluctuations. Such ML models are typically less complex and explainable, which makes them applicable in a regulatory context.

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CORE BANKING

Open Banking and Trust a key issue

Article | April 6, 2020

Open Banking is all about the customer being in control of their data and funds. It gives them the freedom and flexibility to decide when and with whom to share their valuable information. However, as with all vibrant and progressive ecosystems, speed, security, and ease of use will determine open banking’s future success along with the key issue of trust. Will the end user trust people to share data with them and trust their banks to still protect their data? PSD2 Open Banking gives Payment Service Users (PSUs) the legal right to share their transactional account data with regulated third party providers (TPPs). For this to be possible, the 6,000+ Financial Institutions providing transactional payment accounts that can be accessed online have to put in place open banking APIs. These APIs give TPPs the access required to either make payments on an account holder’s behalf or view account data and funds, both of which require the account holder’s prior explicit consent. Access can only be denied if a TPP is believed to be unauthorised or fraudulent. Open banking regulation has given rise to a new group of FinTechs who are seizing the opportunity to create innovative apps and products with the customer at the core of the offering. At the end of 2019, 240 TPPs from across the EEA and UK were regulated to provide open banking services. A year later, this figure had increased to 450 (excluding the thousands of credit institutions that are also able to act in the capacity of TPPs). The near doubling of newly regulated entities demonstrates user demand for the innovative products and services that these organisations are offering – it is now down to trust and security in the ecosystem, along with ease of use, to drive volumes. Source: Konsentus The ability for TPPs, many of whom may be unknown to these Financial Institutions, to request immediate access to valuable data and funds presents many challenges and risks – all of which must be addressed without introducing potential friction in the customer journey. The main challenges are knowing if a TPP is who it claims to be and whether it is regulated to provide the services being requested at the time of the transaction request. After all, these are the key factors enabling the bank to trust the TPP and feel confident the end user can trust them. The added difficulty of knowing which markets within the EEA a TPP is authorised to operate in is an additional challenge. Financial Institutions have long been the trusted guardians of their customers’ data and funds. Although the open banking model means the customer now has ultimate control of their data, it is still primarily the Financial Institution’s responsibility to ensure nothing goes wrong and they are likely to be held liable in any disputes that arise. There is also the very real reputational risk to Financial Institution if something does go wrong. Checking a TPP’s identity, its current regulated status, and the services it is requesting to perform are essential but not easy tasks to complete in that, firstly, a Financial Institution needs to determine whether a TPP is who it claims to be. This is done by having real-time access to the 70+ Qualified Trust Service Providers (QTSPs) who can issue PSD2 eIDAS certificates. These eIDAS certificates contain the requisite information on a TPP’s identity and are used to secure communications between Financial Institutions and TPPs. They also digitally seal messages, ensuring the integrity of the concept and proof of origin. However, an eIDAS certificate can have up to a two-year validity period. During this time, changes may have been made to a TPP’s regulatory authorisation status by its Home National Competent Authority (NCA). This introduces significant risk to the Financial Institution’s decision process. eIDAS certificates also do not contain information on the countries a TPP is authorised to provide their products and services into under passporting rules. This information is held on the TPP’s Home NCA Credit Institution and Payment Service Provider (PSP) registers. Between them, the 31 NCAs maintain over 115 databases and registers. Checking them at the time of a transaction request is paramount to prevent fraudulent TPPs from slipping through the net. According to the Konsentus Q4 2020 TPP tracker, every country in the EEA had at least 75 TPPs who could provide open banking services. These may not all be Home regulated TPPs. Take, for instance, Germany, who had 35 Home Regulated TPPs in December 2020 but an additional 112 TPPs who could passport in their services. To do the requisite due diligence on all these TPPs would require having online access to all the databases and registers hosted by the NCAs regulating these TPPs. This means connecting to the 31 NCAs and interrogating over 115 separate registers in real-time, in addition to connecting with all the QTSPs who issue PSD2 eIDAS certificates. When a Financial Institution is presented with an eIDAS certificate by a TPP, if a real-time online connection can be made to all the legal sources of record, the Financial Institution can make an instant informed risk management decision on whether, or not, to give the TPP access. All this can be done behind the scenes without the end user even being aware of what is happening. As volumes look to dramatically increase over the next few years fraudulent and other sorts of attacks are bound to increase. Financial institutions are going to face increasing challenges around protecting end users’ data, ensuring access is only given to those with the appropriate authorisations and permissions. A very real risk for them is the reputational one; after all, end users may not be that good at separating a reputational issue around open banking from broader issues around their banking relationship. For Financial Institutions, maintaining trust in their brands is going to be crucial going forward, but the risks are going to increase if they have not locked down who can access end user account data and funds.

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Coronavirus is slamming markets. What’s an investor to do?

Article | April 6, 2020

With the markets on Thursday taking their biggest fall since 1987’s Black Monday and the record-setting bull run now a thing of the past, the average investor with a nest egg tied up in a 401(k) might feel powerless to stanch the blood-letting. In many cases, sitting tight amid the mayhem and stock market gyrations is the best approach, though some believe there could be steps an investor can take to limit the damage.

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Spotlight

LaSalle Investment Management

LaSalle is one of the world's leading investment managers. We build long-term and trusted relationships with our clients – wherever they are and wherever they invest. We are focused solely on one asset class: real estate. This enables us to deliver competitive investment performance, along with the highest levels of client service. Our diverse client base consists of more than 400 investors across the globe, including pension funds, insurance companies, sovereign wealth funds, endowments and individual investors. LaSalle has rich heritage spanning more than three decades, and now boasts more than 700 employees in 24 offices across the globe, with approximately $64 billion in private and public real estate property and debt investments (as of Q4 2018).

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