Rocket Companies announced that it is providing its 2.6 million mortgage services customers with free premium access to its own recently acquired personal finance softwarewhich will be renamed Rocket Money.
Additionally, 3.4 million members using the former Truebill software, which will be officially renamed at the end of next month, will be able to join to access Rocket’s mortgage and auto loan products.
“The point where we are evolving is yes, you want to improve your finances, but it is not an end in itself. You want to improve your finances towards some goal. The goal could be buying a house, a car or a refinance, “said Haroon Mokhtarzada, co-founder and CEO of Rocket Money, in an interview.” The platform then actually closes that cycle and offers you that product “.
The company’s latest plans for personal finance technology raise doubts that the broader home loan industry, known for taking a page from Rocket’s most innovative digital strategies in the pastcould do it when it comes to that.
The acquisition of the former Truebill created a countercyclical advantage by generating recurring revenue from clients who don’t work with Rocket’s lending units, analysts at Keefe, Bruyette & Woods noted. These cash flows are separate, but complement, service revenues that mortgage companies will increasingly depend on if rates continue to rise and originations continue to decline.
Additionally, with rising rates decreasing rate and term refinancing, the potential mortgage leads that personal finance software can generate are attractive in the current market environment.
“Lenders are looking for excellent consumer databases in which to market their products. With this technology, they can see opportunities for people who are perhaps, let’s say, over-indebted and who could be candidates for a consolidation loan, “Stratmor Group Senior Advisor Brett McCracken said in an interview.” The key is that you want to reach them before they reach your competitors. When you can accumulate a variety of signals from your existing customers, you can do it before your competitors notice. “
However, Rocket’s acquisition of Truebill was priced at $ 1.28 billion, suggesting at least a potential barrier to entry for the typical non-bank looking to pursue a similar strategy. Although mortgage companies have amassed money during an unprecedented refinancing boom in the past couple of years, few have the size and resources of Rocket or the breadth of financial products. In addition, the industry has been grappling with thinner margins more recently and many have been in cost-cutting mode.
While other big players in the industry may not offer a resource quite like Rocket Money, they have made some efforts to support borrowers using similar technologies or provide related information such as quarterly updates of credit scores and property values, Greg Self said. mortgage director of the firm at the consulting firm CC Pace. He sees room for improvement when it comes to the customer experience involved.
“Larger servicers are more likely to interface with personal finance software, but in my experience this process is still clunky,” he said in an email. “Smaller servicers are usually not connected.”
The industry generally manages software systems for mortgages and personal loans more or less separately, but some information is exchanged between actors who could benefit from automation. Self, for example, said he updated the information in his personal finance software due to a service transfer and noted that he was able to do so after a process of generating, retrieving, and submitting the code.
“You want to control the experience, but it has to be a great experience,” McCracken said. “You want to provide an experience that adds value, saves time, and makes a complicated experience much more simplistic.”
What Rocket is doing involves a higher degree of automation and more data points than are typically exchanged between personal finance and support services systems, Mokhtarzada said, noting that the company is starting with access via a single account and will further integrate customer experiences over time.
“For example, when you go to check your mortgage, you will be able to look at your finances as well. We are working to get a singular view and dashboard or control panel for your financial life, “he said.” You will see every asset, every liability you have, full visibility into your credit. It makes sense to be able to look at these things together. . It’s also a bigger picture than just linking mortgages and personal finance. “
The current mortgage market requires investment in leads over a longer period of time, which this kind of overall approach is favorable to, Mokhtarzada said. Both Rocket and Truebill said they had high customer retention rates, with the former having a net customer retention of 92% at 12 months at the end of the first quarter. (Second quarter earnings had not yet been released at the time of this writing.)
“If they’re not ready to buy, the question is how to maintain and establish a relationship and loyalty with that person so that when they’re ready to buy, you don’t have to acquire them again? This is … what we have to offer, “Mokhtarzada said.” There are times when the mortgage business is more difficult and what we are seeing is the vast majority. [companies] they are downsizing, but Rocket is investing. “