Economy

Gaping Holes in Digital Disruption are Hurting the Economy and Presenting Big Opportunities for Investment

By Eric Rachmel, CEO, Brace

When business leaders discuss digital disruption, they tend to take a big picture view. They often discuss how their industries are adopting new technologies, and send the message that they’re keeping up with the times. What’s sometimes lost in these discussions is a complex reality that has a profound effect on businesses, their customers, and investors: Disruption doesn’t happen evenly. While parts of an industry may be flourishing with successful innovations, other parts of those same industries can be left behind.

These fault lines within industries have long been problematic, but the pandemic has made them worse. With lower staff and more consumers in dire need of help, businesses have discovered that gaping holes in their technology are preventing them from being able to provide the goods and services people count on.

It has also made clear why businesses must address them. The functions within various industries that remain largely “forgotten” by technology drag down entire industries and the economy as a whole. While my work shows me the extent to which this is happening in the mortgage industry, it’s a phenomenon repeated elsewhere as well.

Desperation in mortgage servicing

Throughout the pandemic, there have been harrowing stories of homeowners unable to make their mortgage payments and afraid they may face foreclosure. While the government has taken action to help, millions of people have been lost amid a great deal of confusion, trying to figure out what they need to do to hold onto their homes.

“I was on the phone for almost six hours. I can’t imagine how many people don’t have six hours to spend,” one homeowner told CNBC last year.

"The stress of this situation has affected my physical and mental well-being, strained my personal relationships as well as the ability to do my job. I have spent hours on the phone, and writing letters,” another homeowner wrote in a letter to the Consumer Financial Protection Bureau.

Why has this process been so stressful and complex? Because of a digital fault line. In recent years, applying for a mortgage has become easier than ever due to technological tools. But once you’ve got a mortgage, it goes into the hands of a servicing company. And in many cases, unfortunately, servicing has remained in the technological dark ages, filled with analog systems and paper documents.

Fixing the problem is what inspired me to create the business I run now.

From food production to health care and more

Numerous industries face a similar predicament. Take food production for example. “We’ve made major progress over the past 5,000 years, yet this crisis showed us how unprepared we are when the system breaks down,” technologist Tej Luthra told the Forbes Technology Council, citing the need for “a robust and resilient distribution system” that reduces waste. Deloitte explains that fixing supply chain problems will require greater use of digital supply networks to avoid future bottlenecks.

Others point to the construction industry. Although increasing numbers of startups have been sprouting up in recent years, parts of the industry remain very much “tech-averse.” The pandemic has made the case “for digital tools that are proven to increase productivity, such as 4D simulation, digital workflow management, real-time progress tracking, and advanced schedule optimization” even stronger, McKinsey reports.

Perhaps most prominently, digital fault lines in the healthcare industry have been exposed by the pandemic. In an extensive report, Accenture looked at parts of the industry that have lagged in technological advancement, including moving information to the cloud and taking on a “virtual-first approach.”

The crucial role of investors

The good news is that investors are helping all these sectors advance. Recognizing the urgent need and the opportunities for growth, they’re supporting startups and pushing enterprises to undergo long awaited change. As a former investment banker and venture capital investor myself, I’ve seen the power investors can wield, helping move things in the right direction.

With more and more unicorns being minted, investors are moving more quickly into some bigger bets, giving themselves greater stake in companies that are poised to build the waves of the future.

In this ecosystem, the businesses creating the missing technological components of various industries have a greater chance to grow -- and to fill the digital fault lines. The more that these companies get a shot at success, the more solutions society will have. Then, there should be fewer heartbreaking stories of people left behind.

Eric Rachmel is CEO of Brace, which provides next-generation mortgage servicer software solutions, offering a best-in-class loss mitigation platform to the servicer community.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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