The role of technology in digital mortgages
Jonathan Westley is managing director for consumer information services at Experian
We live in a generation where technology has become more integrated with our daily lives. Anything we want is at our fingertips, whether it be accessible through our home computers, laptops or mobile phones.
As digital accounts start to grow with maturity, customers are drawn away from traditional methods of obtaining a mortgage and making them simpler and more transparent.
Research shows that millennials in particular are increasingly trusting when it comes to technology. Even when it comes to mortgages they are driving digitalisation with just under half willing to use an app to purchase their mortgage.
It’s more than a mortgage
Mortgage lenders are adapting alongside the latest developments in technology to provide secure platforms for customers to share and verify documents online, making it easier than ever to switch to digital-based accounts.
This provides customers with the opportunity to look further when it comes to home hunting and be more flexible when it comes to applying for a mortgage.
With 11 million UK residents having secured credit on their property, mortgage lenders are operating in a process-driven market place.
It is a high demand and a high value area to be in.
Customers are no longer focussed on the specifics of what their mortgages are, but instead they’re considering more about their property – what are its distinctive features, its location, nearby shops or schools and the change of lifestyle that comes with being a new home owner.
Switching to digital
The process of obtaining a mortgage is complicated.
With more people switching to digital-based accounts, we need to ask how customers can be expected to provide paper proofs if they no longer have them?
The application process will only be elongated, adding yet another week or so to the procedure.
Consumers are driven by finding the best financial deals.
With mortgages demanding a vast proportion of their income, cost is going to be a considerable factor when deciding which account to go with.
Research shows that three out of four young adults have switched to digital bank accounts and four in 10 customers believe that chatbots and robo-advice systems will provide a more efficient and convenient way of talking to an advisor, saving both time and money.
Almost two thirds of customers also stay loyal to their current providers.
However, under half have reportedly chosen to access their mortgage account less than once a year, showing that engagement with providers is low.
There is a distinct appetite for digital mortgages as more than half of customers access their accounts online.
This shows that the right technology could offer vast potential to lenders, and used appropriately will complement the needs of the customer too.
Personalising your mortgage
Lenders need to have a clear understanding of what their customers actually want from the mortgage process and recognise that there will be differences between each individual. Streamlining processes, altering efficiency and lowering the cost of service will be instrumental to this.
This will also need to be digitally inclusive whilst remaining compliant with customer demands. They will be able to have their electronic identity and scrap the need for paper proofs.
By improving processes, customers will also be able to validate affordability through categorisation and will further be able to deliver personalised options.
Prequalification will allow providers to predetermine the right products for the right people, simplifying the process and personalising the needs of the customers.
Providers also need to consider how they want to use technology. They need to think about what the customer wants and how using technology can help them achieve these for each individual.
Keep in mind that with over 11 million customers, there will be a lot of demands.
The rise in mortgage application times is due to the MMR (Mortgage Market Review) and guidelines have been interpreted by lenders, resulting in more detailed, robust and specific applications. Although this hasn’t stifled innovation, regulation has encouraged it.
Developments in new tech-enabled models and enhancements to transformation projects can update legacy systems, replacing them with modern, agile and adaptable platforms.
But how can customers make the shift?
Transforming the back-end of the platform and moving towards a more flexible and innovative model will be tricky. It’s important to consider how providers will transfer all of the background information stored in previous platforms?
Evidently, with advancements in technology already shaping 2018, the mortgage market is subsequently due to change as well.
Both customers and regulations will adjust to keep up with such developments but how much they change will be dependent on their appetites.
The most principal factor remains – the customer needs to stay at the heart of any change.