Fast, efficient and error-free mortgage lending is the expectation of today’s borrowers, with digitally enabled mortgage experiences expected to become the norm as firms across the industry continue to invest in digital innovation. Digital technologies will transform the mortgage loan value chain, and it’s vital mortgage providers keep up with this innovation to ensure they stay competitive in the market.
Senior Vice President and Industry Head of Financial Services and Public Sector of Infosys, Ajay Vij, has 20 years of experience in growing technology, consulting, and outsourcing business in Europe and North America. Vij has a strong background developing product and platform partnerships and large transformation deals with financial services clients. He is actively also involved in collaborating with the fintech ecosystem, working with key technology disruptors that have the potential to change the business models in banking.
Here he gives his views on how innovation can revolutionise the UK mortgage market and stimulate competition:
The UK mortgage market is booming. In March this year, net borrowing levels reach their highest of any month since data began in 1993 and, as we enter this next phase of eased covid-19 restrictions, there are no signs of the market slowing down. Whether buyers are opting for a snazzy new fintech or an established mortgage provider, a customer centric mortgage experience is believed to be one that truly supports the home buyer in removing friction and pain points in the customer journey. These customer expectations, extensively shaped by advancements in mobile and online banking, are of a simple end-to-end home purchase experience.
Despite promising growth, the mortgage industry is beset with various challenges, including limited transparency, multiple parties, manual processes and elaborate paperwork. These challenges are compounded by the pandemic and a continued low-interest rate regime is impacting margins and profitability. Going forward, as companies seek to make the most of a market boom, it’s imperative that they address these challenges and recognise the implications they may have on borrower credit health.
The cost of originating loans remains high. Mortgages are complex products, and customers have to navigate multiple disjoint systems and touchpoints. Mortgage application, documentation and follow-up are currently multiple steps for the borrower. Some processes remain offline, while others are on a single channel only.
Improving mortgage customer experience and reducing cost through technology has therefore become a priority. Banks are deploying a set of approaches through process optimisation, automation and AI to increase profitability, and improve customer engagement.
In the UK market, brokers have significant influence in shaping a customer’s first impression of a lender. While the traditional lenders are strong on parameters like brand, they have lost out to the superior customer journey and responsiveness offered by challengers.
There is thus an urgent case to evaluate solutions across AI, intelligent automation and advanced data analytics that provide complete business process digitisation while leveraging deep industry knowledge.
AI and ML-based origination solutions results in lower origination costs, reduced credit losses and quicker processing. These solutions, with their extensive parameterisation capabilities, can help introduce new, innovative and tailored product constructs thus deepening the market further and enabling lenders compete on parameters other than price. Chatbot mortgage advisors with a focus on technology enabled guidance can lead existing customers and millennials to these products with insight based financial product recommendations.
Further, it is important for banks to focus on their core lending business while reducing cost to serve. Shared Infrastructure entities like Stater offer mortgage as a service in the origination, servicing and collection space to 80+ mortgage providers in the European region, leveraging economies of scale.
E2E digital platforms streamline customer journeys from search-and-shop till closing. Banks can digitally collect documentation on the customers’ credit history, income and assets directly from bank statements and tax filings and take digital signatures where required. Open APIs have provided the ability to access data from bureaus and third parties to speed up the loan process. Open APIs also enable embedding the product in an ecosystem of services, such as real estate and insurance services, which ultimately enhance profitability of business operations.
Mortgage lenders globally have begun equipping themselves with a technology led transformation approach. An area of focus is AI models, that are being trained to make real time decisions, crunch large volumes of data, improve fraud detection, and more importantly, predict the behaviour of the loan applicant. OCR based document processing can help banks reduce routine processing tasks and move staff to higher value work. RPA can increase productivity and accuracy by replacing repetitive and rule-based activities.
Likewise, intensive use of Data Analytics can help in simplification of the mortgage process. Leveraging the vast amount of data available can drastically reduce processing time and improve customer experience. Cloud-based and API-enabled journeys cut the time and expense of originating a mortgage, while also integrating the platform end to end. APIs can also help in workflow automation.
Lenders are also experimenting with blockchain to create a digital ecosystem that prevents repeat validations and builds digital trust. The technology has the potential to take away operational cost, time and friction from the process and create immutable transaction records, while also doing away with the 4-eye maker checker process. Blockchain can also introduce digital fractional ownership products to the Product shelf, thereby introducing new revenue streams for mortgage lenders. Other digital technologies like content and document management can reduce paperwork overhead thus reducing cost, as also re-work due to manual errors.
Despite the digitisation brought about by the pandemic, the movement away from paper-based processes to a complete digital-first loan is some way away. Banks need to improve their processes to enhance productivity, disburse more loans, and increase revenues with cost-effective and automated services.
The industry is yet to reach its full potential, but a transformation is underway. As mortgage executives pivot from responding to the pandemic to thinking about how they will recuperate and thrive, leading mortgage lenders will take the lessons learned to rethink their transformation delivery, business-model innovation, and overall market positioning.