Digitalisation is it an opportunity or threat for mortgage lenders ?

Well I believe digitalisation is an opportunity, but for many lenders it could turn out to be a threat if they do not respond to the challenge to build a digital strategy and deliver a digital proposition.

So, what do we mean by the term digitalisation?

One definition is to take a current process or model and use digital technologies to provide a differentiating service or proposition with the ability to drive costs down and increase revenue earning opportunities.

Perhaps a simpler example is my smartwatch – in this instance Pebble. Pebble has taken an ordinary watch and introduced technology to digitally link it to the connected world of the Internet via my smartphone. I can read emails, alerts, SMS messages and respond to them and pay for my coffee at Starbucks and even check my bank balance.

Digitalisation should be seen as a tool of transformation which extends beyond our lifestyle, to the way we transact, interact and conduct business. The good news is that we don’t have to digitalise the whole journey or business model overnight, we can take one digital step at a time.

Let’s look at a couple of steps that we could start with in the mortgage world.

Paper and financial services deforestation – can we remove paper from the process?

I do not know how many forests the mortgage market has had to replant in the last 20 years, but it won’t be an insignificant number.

To some extent the MMR has encouraged further paper usage in the application process as lenders have to gather and review additional supporting evidence, particularly around income and expenditure.

But mobile technology is able to help remove paper from the process and increase efficiency.

Customers and brokers can take a photo with their smartphone or tablet, of documentary evidence, say a P60, and attach it directly to the mortgage case, so it can be viewed in context and assessed. And now there are solutions that can read the data directly off the image and populate the data into the application and automatically assess the information.

The IRESS Intermediary Mortgage survey earlier this year, showed that brokers want paperless mortgage transactions, with nine in 10 (90%) wanting lenders to introduce a scan and attach feature as a priority.

So going paperless through digitalisation is an opportunity, but to achieve the greatest benefits, it must be embedded into case processing.

Transparency – when will I know ……?

In all walks of life we want to know when something is going to or has happened. When will my parcel arrive, how long will it take and when will the train arrive?

Retail businesses lead the way in transparency – they tell you when an item is planned to be sent, when it has been despatched, by whom and when it will arrive, often to a one hour window, even a text from the delivery man saying I’ll be arriving in 10 minutes. Not only that, but a confirming email that it has been delivered and signed for.

Why should buying a mortgage not be as transparent?

With 3 out of 4 adults owning a smartphone, and with tablets outselling PCs this year, lenders have an ideal way to communicate to the always on consumer, through messaging apps, SMS and secure web links.

The key though, is to digitally connect actions and milestones occurring in the mortgage administration centre automatically and directly in real time to the consumers device of choice. And some lenders are already delivering such a service.

The democratisation of technology and finance

The democratisation of technology and finance, coupled with the consumer demand for all things digital, means that the mortgage industry cannot afford the watch these changes from the side lines. As an industry we need to innovate both in technology and product design. As part of the government’s innovation agency, Innovate UK, the FCA have set up an  Innovation Hub. They are looking for innovation in financial services and the FCA wants to remove any barriers to innovation and wants lenders and vendors to develop technology led innovation to enhance the mortgage buying experience across all channels to market.

Millennials have grown up in a digital world, it is how they expect to interact in society and in business. Even Baby Boomers like myself have embraced the digital economy, so the demand for digitalisation and automation is not going away, and indeed it is going to grow and grow.

Add challenger banks into the mix and digitalisation can be a threat to traditional lenders.

The challengers are unencumbered by legacy platforms and are more like technology companies such as Amazon than traditional banks and lenders. They will appeal to the digital generation.

In conclusion, digitalisation is an opportunity. 

But banks and lenders need to think beyond apps and websites and about digitalisation throughout the mortgage value chain, including a step by step approach, such as removing paper and providing a completely transparent process.