It’s not a new story. During soft market conditions, title and settlement services firms seek to cut their expenses. That generally means paring back or eliminating expenses and resources that can’t be classified as “revenue-producing.” It’s been a way of life for many over the past 18 months.
IT services and cybersecurity generally aren’t considered revenue generators in the title industry. Therefore, they’re among the expenses owners and decision-makers traditionally seek to pare back or even eliminate when order counts drop. While it’s easy to see why that’s the case from a very short-term perspective, that viewpoint eschews the very real, and very significant, threat that emerges when they leave themselves under-protected and under-prepared for an exponentially growing and evolving threat of fraud and cybercrime.
Of course, it’s easy to tell a business owner that they “can’t afford” to cut things like cyber security, compliance resources and the like because of the potential for crushing consequences. But when bills and invoices need to be paid and payroll needs to be met, almost any decision-maker will address the actual threat before allocating resources toward the potential danger. It’s not always short-sightedness that brings about deep cuts. Sometimes, it’s pure necessity.
Fortunately, title agents and owners do have other options when it comes to cybersecurity and IT resources. Many of them involve simply digging deeper into exactly what they’re paying for with their existing resources.
The threat is real
The numbers don’t lie, and the picture is only growing more complicated. Natural Language Processing AI will very soon be wielded by criminal syndicates to make fraud and cybercrime even more prevalent and harder to defend against. The word is out: title and settlement services businesses are treasure troves of valuable data with access to substantial amounts of cash, yet most of them are only beginning to erect the most rudimentary of defenses.
In 2023, it’s projected that cyber attacks will cause a staggering $6 trillion in damages worldwide. Business email compromise (BEC) cost businesses and consumers over $2.7 billion in 2022. And, in a 2023 ALTA survey of the title industry, 46% of the respondents reported their employees received at least one email attempting to change wire or payoff instructions monthly.
This is most certainly not a case of crying “wolf.” Fraudsters and cybercriminals are well aware that title-related businesses are optimal targets. They’ve already put the industry into their crosshairs. For title agents and owners, paring back on cyber defense is a gamble that could cost them their businesses.
Resource efficiency and cost management
If there is a drawback to the movement towards automation in the title industry over the past few years, it involves, ironically enough, efficiency. Settlement services firms haven’t just invested in technology en masse. They’ve also rushed to the cloud, substantially increasing their expenditures on things like Software as a Service (SaaS). But too many have treated these investments as one-time or one-off expenses. In so doing, firms that haven’t continued to focus on resource efficiency and cost management are leaving big money on the table.
For example, in our own business, we generally find that potential clients could discover a 10% savings in their Microsoft 365 licensing. We typically see businesses that could actually realize a 20% savings or more if they were to take simple steps toward Azure resource efficiency. Now, consider that these are usually among the largest ongoing expenses for cloud-hosted businesses.
Too many firms also fail to do a regular audit of their own licenses. Especially during a time of mass layoffs, it’s likely that dozens or even hundreds of title firms are paying for licensing for employees who have long since left the company. A routine and consistent review of licensing could easily reveal truly wasted expenditures.
Tactics for cost savings that won’t compromise security
There are a number of ways in which savvy title business owners can turn fixed expenses, which are anathema during volatile market cycles, into essentially scalable costs. There are also more than a few ways to pare unnecessary expenses without leaving the business vulnerable. One simple tactic is to swap out any remaining traditional phone (and yes, fax) services for cloud-based PBX providers.
Another is as simple as negotiating the firm’s ISP bill. After all, during volatile economic conditions, almost everything is negotiable. Additionally, title businesses could consider consolidating multiple IT product purchases under a single vendor. These companies can realize 10 to 20% savings simply by leveraging the greater bargaining power and volume discounts of established IT and managed service providers, not to mention being better able to manage multiple IT purchases by keeping them under one roof.
And, of course, as mentioned previously, title businesses that routinely audit their licensing are often surprised by how much money they’re throwing away by not staying current.
Cost cutting is a painful but often necessary undertaking for settlement services firms riding out a soft market cycle. A case can be made for many non-revenue producing expenses as essential, but the reality is that some expenses must take priority over others when revenue is down. Updated IT and cyber security systems and services are absolutely essential and growing more important by the day, especially for the title industry. And while some trimming should certainly be expected, title business owners can also realize substantial cost savings by reviewing exactly where their IT dollars are going. In many cases, there’s an alternative that meets the need without diluting security.
Kevin Nincehelser is an IT professional, business consultant and COO for Premier One, an IT consultant and provider for title agents.
Shawn Fox has spearheaded the sales and marketing efforts driving Premier One’s growth in the past six years
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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