By Roshan Shetty, VP & Head of FS for Benelux, Switzerland and Nordics on the digitisation of mortgages, Infosys
Financial services have been early adopters of digital, led by the ever-increasing ways in which clients consume financial products. Along with a push by digitally native Fintechs, which have rewritten the rules of customer engagement and increasing regulatory complexity, banks are redefining their role in the ecosystem.
Ironically though, they have largely ignored the product which holds one of the longest relationships they have with customers – mortgages. With digital pervasiveness, it is no longer prudent to disregard mortgages.
Mortgage firms have always been grappling with an existential challenge – rising costs. Ever since 2008 financial crisis, a tightening regulatory environment has inflated both mortgage origination and service costs, hurting profitability. This is further exacerbated by the fact that mortgages have the least digital penetration compared to other financial products.
Meanwhile, conditioned elsewhere by slick retail experiences that emphasise convenience, customer expectations have soared. They expect better – rates, services and experiences. Unfortunately, consumers consider obtaining a mortgage as one of the most challenging rites of passage involving a labyrinth of rates, tenure, lengthy processes and products.
End to end digitization
If traditional mortgage distributors are to remain relevant, they need to reimagine loan origination and transforming mortgage servicing. Only by embracing end-to-end digitization, can they transform the customer experience, streamlining the latter’s journey from pre-search to post-close loan servicing. For a start, lenders need to modernise and transform the entire loan origination process to focus on reassurance, convenience, speed, and transparency.
A customer needs to know he is making the right choice in view of the complexities and multiple choices he is often faced with. Avoiding unpleasant surprises and upfront resolution of key issues go a long way in reassuring the customer. Helping the customer understand, with minimum touchpoints, the steps to follow in the mortgage process along with clear guidelines on credit assessment and documents required can make the entire experience less intimidating.
Time is of essence when applying for home mortgage. Adhering to stipulated timelines, proactively extracting data from the customer’s profile and quick sharing of information can make the process faster. Stating the pricing clearly, setting expectations on the timelines and real-time status updates bring transparency that customers truly appreciate.
In many ways, traditional mortgage providers must follow in the footsteps of Fintech start-ups, whose operating models succeed because they keep the customer at the centre of the mortgage lending process. A front-to-back transformation in mortgage requires optimisation and intervention across complex processes and technology ecosystems. The heart of this digital push will need to contain customer-centric design, clean sheet business process transformation, rapid technology buildup and offering new capabilities and ways of working.
New demographics, new expectations
The demographic shift to digitally smart customers puts the focus on the importance of digital channels for customer acquisition. Such channels need necessarily empower the customer to seamlessly navigate from search or social media to the mortgage provider’s website to easily find information. With the use of comparison and lender websites set to rise at the expense of traditional channels, banks need to invest in channel transformation to engage with the new demographic and enable them to compare and purchase. Inbuilt product selector and comparison tools that allow clear, concise and simple comparison across products, coupled with mortgage calculators that display rates with flexible terms are imperative.
Traditional origination is full of complexities, not to mention increasingly expensive for lenders. Cloud based and API-enabled digital solutions proactively find potential borrowers using public and purchased data, targeting specific demographics leveraging analytics before they start the mortgage process. Since complexity is the biggest challenge that customers face, incorporating a section to answer frequently asked questions, educational tools or videos, and agent chats to answer queries lead to the next step.
Digital tools for the digital era
Conventional credit assessment methods used by lenders tend to look backwards at past financial records. The game has moved to forward-looking indicators such as the borrower’s education and employment information, including graduating university, field of study and type of job. This is a better determinant of the person’s future potential for repaying the mortgage, incorporating the borrower’s finances, profession and lifestyle into its assessment, using artificial intelligence and advanced analytics to score credit worthiness.
Such innovative technologies quicken the home loan application process. Digital collection of customers’ credit history, income and assets directly from bank statements and tax filings eases documentation. Deploying robotic process automation can validate customer data such as credit checks and repayment history within seconds. Together, these automation tools cut the approval process timeline drastically to offer on the spot answers on preapproved loan amounts, powered by decision algorithms. Eliminating uncertainty empowers customers with the confidence they need in their search for a dream home, arming them with a preapproval letter.
In any given year, the mortgage industry generates over six billion new pages of paper in the United States alone, involving over 800 pages of paper per mortgage! Automating the process of creating, copying, sorting, stacking and physically delivering loan folders to electronic loan delivery streamlines the process, cutting both costs and time required.
A future full of possibilities
Customers today expect a simple, quick, efficient and transparent end-to-end home purchase experience. They demand omnichannel tailored services, whenever they want, wherever they are and however they interact – be it via mobile apps, social media platforms, local branches or customer service centers.
Irrespective of whether it is a Fintech or an established mortgage provider, the mortgage experience that truly supports the house buyer end-to-end is the one that will prevail. While Fintechs have a head start technology wise, traditional lenders hold a lot of cards too. They have an existing customer base, brand equity, great customer data ready for mining and hefty financial resources. Adding a capable technology stack into this mix of assets will not only protect market share but also enable the them to engage new areas of growth. All they need is a right partner to lead them into the new digital era.