Digital mortgage journeys are hugely fragmented, riddled with the burden of manual processes and substandard levels of user experiences both for the end customers and bank employees alike. With millennials compromising 70% of first-time buyers in the UK – 57% of whom would choose a digital channel if applying for a mortgage today – overhauling this line of business should be a priority in a bank’s digital strategy.
In light of this, Guy Johnston, account executive at Backbase, here shares his thoughts on how digitalisation is the future for mortgage journeys
The time is now for banks to modernise journeys. Until now, numerous systems and drawn-out processes have all led to a tedious journey for customers and employees alike. With millennials comprising 70% of first-time buyers in the UK – 57% of whom said they would likely choose a digital channel if applying for a mortgage today – digitalising mortgage journeys and overcoming the inefficiencies caused by banks’ traditional siloed structures will be vital for banks to move into the 21st century. This approach will allow banks to be able to maximise efficiencies and achieve their primary aims: gaining and retaining more customers and increasing their profits.
A product line forgotten?
Banks and other financial institutions have spent the last few years investing in digital transformation, ensuring that the seamless digital experiences that their customers have come to expect in all parts of their life extend to their banking experience – from opening a savings account to accessing customer support. This has been significantly accelerated by the proliferation of neobanks and fintechs, who have set a new standard for digital banking experiences.
But there is a major outlier in banking’s digital revolution: the mortgage market. According to a recent report from GlobalData, in the UK, traditional incumbent banks still control 77% of the mortgage market, with long-established building societies continuing to play a huge role.
This comes as no surprise; the mortgage market is relatively unattractive to fintechs. Business models based on mortgages are typically cumbersome, with capital being locked in for long stretches of time. Fintechs want to be able to quickly adapt their business models to encompass innovative technology and react to new customer expectations and changes to the market, staving off new competition and staying at the top of their fields. They may struggle to see the possibilities of this within the staid mortgage world.
Moreover, mortgages are often a complex and important decision in any person’s life – it’s something they will be paying off and accounting for in their budgets for many years – making the face-to-face advice that they receive from intermediaries and banks’ employees themselves invaluable. The importance of this personalisation is unlikely to change.
But that doesn’t mean that technology doesn’t have a role in the mortgage journey. Many of the inefficiencies associated with mortgage journeys could be significantly improved by digitalisation without sacrificing personalisation. Sending a photo of personal documents along with a selfie, receiving updates digitally instead of through post, and video calls instead of in-person meetings, for example, could all help to streamline this journey.
For many banks, the opaque nature of mortgage journeys is often a significant source of friction.
From a customer’s perspective, the fact that banks are still using methods like faxes and letters to send updates means that they often don’t know the stage of their application or how long it will take to complete the process. This leads to high call volumes, lengthy completion times, and above all, increased stress for customers over a decision with long-term implications – aggravating incumbent banks’ reputation for poor customer engagement.
And for bank employees, things are not always much easier. Legacy IT means that they must navigate numerous different systems to find the correct information, resulting in preventable inefficiencies and errors while adding time to an already tedious journey.
At Backbase, we believe that the only way banks can overcome these inefficiencies is by digitising processes holistically across all products and business lines, in turn breaking down silos—and making this digitalisation a priority. This will ensure a seamless, overarching strategy that brings together all aspects of the bank’s offerings, with a focus on orchestrating value around the customer rather than around financial products.
In doing so, they will not only be able to enhance customer satisfaction and increase customer loyalty and retention, but will also maximise efficiencies, improve their profit margins, and empower their employees to deliver better, more personalised service.
The incentive for banks to improve mortgages is primarily financial: the more efficient the journey, the more customers they can process in the same time period – and thus, the greater the profit.
There is no need for banks to overhaul the entire mortgage journey; they simply need to shift their perspective and focus on replacing the siloed, disconnected approach to customer service with a single engagement banking platform strategy across the whole organisation. The traditional organisational structure of banks, defined by product and business line silos, has created several problems, and has led to poor customer engagement. A holistic engagement banking platform, however, allows banks to focus on reusability, providing a system where the benefits of digitisation can be felt across the bank’s products. It helps financial institutions digitise all customer interactions over time, rather than dealing with them case by case.
An engagement banking platform also enables and empowers bank employees to provide a superior customer experience, helping them to gain a full view of each customer and their interactions across all the products that the banks offer. Having easy access to customers’ documents, data and past interactions across all products will help lower operating costs, increase efficiency and keep customers with the bank.
In other words, by implementing an engagement banking platform, banks can improve their cross-communication and provide a smoother journey to customers, meaning they are more likely to retain and attract customers – while finding meaningful opportunities to grow their business with them.
The banking sector is experiencing significant disruption as more and more innovative fintechs and neobanks come on the scene – and traditional banks needs to act now if they want to remain competitive.
A single, common engagement platform orchestrating all products and touchpoints for both customers and employees is part of what has brought so much success to disruptive technology companies such as Uber and Netflix. This platform approach is the very key to banks’ ongoing success as the financial services industry continues to evolve.
But the need to adopt and implement an engagement platform approach for banking is particularly acute when it comes to mortgages. The banks that are able to modernise the journey now – ahead of their competitors, and even ahead of the fintechs that may be nipping at their heels – are well-positioned to capture the growing market of young, first-time homebuyers who have come of age in an everything-digital era.