Lenders urged to join ‘digital world’

Ryan Fowler

May 16, 2017

Lenders are being urged to move into the 21st century and end the practice of insisting on original copies of bills and statements and instead accept digital versions.

The current mortgage application process is described as old fashioned and outdated as well as being a barrier to people getting on the property ladder.

Those applying for a mortgage needs to provide proof of identity in the form of bank statements and utility bills but research has found that the majority now use paperless accounts, especially younger people buying their first home.

Homeownership isn’t the be-all and end-all

Some 69% of consumers receive paperless bank statements while 46% receive paperless credit card statements, according to the research from data intelligence specialists GBG .

The younger generation are most likely to opt in for paperless bank statements, with 75% of 18 to 24 year olds saying they receive digital versions of their bank statements, compared to 59% of those aged over 55 years old.

The research also found that 42% of UK consumers do not hold paper copies of their utilities bills for their current address, with 33% signing up to paperless utility bill statements which they receive via email or access online.

The firm believes that if an individual does not have suitable documentation to prove their identity, an application can be significantly delayed as they wait for paper copies from their bank or utility company.

Such delays in mortgage applications can consequently result in frustration, or even a property purchase falling through where the seller loses patience. What’s more, if an individual cannot obtain the original documents, a lender may well turn the application down.

Nick Brown, group managing director at GBG, said: “As incidents of fraud continue to rise, the pressure for banks and lenders to prove someone’s identity has never been more critical.

“These paper first procedures had to be put in place to sort the good from the bad. However, it’s clear these old-fashioned measures haven’t caught up with what’s actually happening in the real world.

“And as more customers opt to receive paperless statements and access their documents online, these traditional processes could hinder a legitimate individual’s chance of getting on the property ladder.”

Those who move home several times can also find it hard to get a successful mortgage application if a lender wants proof of address for previous properties as the research also found that 45% have moved address once or twice times in the last three years and 34% do not hold proof of address documents such as utility bills or council tax statements for each of their previous addresses.

Those aged between 18 and 24 were most likely to move frequently, often as a result of moving from their family home, to student accommodation, to their first home as a graduate and 18% has moved three to four times in the last three years and 70% moved at least once.

Yet 39% do not hold proof of address documents for each of their previous addresses. Failing to provide this documentation could, again, result in an application being turned down by a lender.

The research also asked home owners about their mortgage application experience and 36% found it stressful while 33% said it was a complicated process and 27% found it too long and drawn out.

The research also revealed that it took the average UK home owner just over three hours to source all the paper documentation required for their application.

One recent buyer described the mortgage application process as archaic. “I have paperless billing with my bank and utility providers, so getting paper copies of bills to prove my identity and address was a massive hassle and took a lot of time,” said Juliette Keyte of South East London.

“Buying a house was a hugely stressful experience, and having to prove who I was umpteen times to various different parties exacerbated that. I’m surprised the process hasn’t changed to meet the needs of the modern home buyer,” she added.

These long, complicated processes are impacting the number of successful mortgage applications. Just last month, it was reported that mortgage approvals by banks had fallen to the lowest figure since November 2016.

Furthermore, the average time taken to secure a loan has risen from around 37 days to 53 days as applicants undergo greater questioning on their income, affordability as well as thorough identity checks.

Brown said: “In this digital age, processes should be becoming simpler rather than more complex. Today, we can verify the identity of over four billion people in the world in a matter of seconds, so why should people have to face weeks or months of form frustrations to try and get the service they require?

“As the world continues to digitise, banks and lenders need to bring processes into the 21st century and keep up with consumers’ expectations.

“The digital age creates the need to allow legitimate customers to on-board with ease and speed, whilst stopping fraudsters. Using identity data intelligently allows businesses to make better decisions quicker, and ultimately make processes slicker and more accurate.”

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  • The good is that this data is electronically accessible and (soon) can be retrieved by permissively and able to be consumed by systems far, far easier. The bad is that lenders are way behind the curve. The answer is that if you’ve sourced the data from an institution, why not “sign it” as trustworthy and have the plumb directly into the lender?

    Massive wins for the client (faster processing), adviser (quick data collection and due diligence) and the lender (trustworthy and verifiable data). The problem is getting the lenders to supply (which they will have to in 2018) and then receive that sourced data back in without further verification, but it shouldn’t be necessary as it came from a lender in the first place.