With a rise in machine learning, AI and robotics in the mortgage industry, it would seem the industry overall is on the cusp of a digital revolution. A shift to digitally-enabled experiences in the UK market is already underway and is shaping the future of the sector for lenders and consumers alike.
Read the rest of the article to understand how the mortgage industry is evolving, the key obstacles to mortgage automation and how lenders can overcome them.
‘Digital change’ comes in many forms, for example:
Then there are the market ‘Disruptors’ - a term we are hearing more often. Disruptors are those who are entering the market, offering faster, smarter and better consumer experiences.
Disruptors in the UK mortgage sector have demonstrated how new technologies can fundamentally change user experiences, create new offerings and significantly reduce the effort required to progress key mortgage activities. ‘Digital intermediaries’ (or ‘digital brokerages’) are now entering the market, some examples being One77, Habito, Trussle, L&C, and Mojo Mortgages. These disruptors offer customers a real-time view of bespoke and eligible products, and let them complete online applications with the support of a digital mortgage adviser. Post completion, they run daily checks to ensure the customer is still on the best deal for their needs.
A good example of end-to-end mortgage process disruption would be the fintech start-up ‘Molo’, the UK’s first fully digital mortgage lender. Molo is the first in the market to offer mortgages underwritten fully online. It’s not just their distribution model that is fully online, but also the back-end. Molo leverages automated decisioning and real-time data validation to give customers instant answers and a better overall experience.
Despite all of this, for those responsible for mortgage transformation within established lenders, it can also feel as though technological adoption isn’t happening fast enough. Although most lenders have a target of 15 days, on average, it can take between 18-40 days for an application to progress to offer, and there may be further delays from offer to completion, as a result of the buying chain.
While digital transformers is happening, the majority of lenders have not fully integrated digital technology into the end-to-end mortgage journey - so why is adoption of automation so slow for something deemed so important?
There are common pain points across the process that are inhibiting an end-to-end digital mortgage journey. Examples include the differing data requests and data formats shared, the conveyancer process and the lack of a central asset repository for customer information. Below we have detailed what our clients say are the key obstacles to change - with suggestions on how to overcome them.
The mortgage process requires collaboration among a variety of stakeholders, from the executive team, operations, IT, risk and compliance. Getting all parties to adopt digital mortgage technology is a challenge.
Not surprisingly, the regulatory environment in the Mortgage industry combined with strict risk and security protocols, presents a key barrier to moving forward with automation of key processes. This often arises from uncertainty and lack of standardisation around privacy, security, legal and compliance issues.
Regulation and compliance is a hindrance because is slows down the pace of change and innovation. This is because resources and budgets often need to be directed to regulatory compliance, and lenders can be hesitant about investing in innovations that might be overtaken by regulatory change.
Mortgage companies that have previously explored updating their technologies and systems, may have found themselves in an “all-or-nothing situation”. Most lenders will have, over time, bought multiple third party point solutions to manage specific tasks and workflows, but later discovered they don’t actually work together. The perception is therefore that new technology is too expensive and takes too long to implement - it’s either "replace everything, or do nothing", which can seem overwhelming.
As expressed above, many lenders are currently running their operations on legacy software customised to their specific needs. These systems are embedded in the culture and operations of their businesses and cannot simply be replaced by new technologies. Many mortgage companies are reluctant to change these critical systems that they’ve relied on for many years.
“Open architecture allows the creation of seamless, integrated experiences through a single platform”
The mortgage market is one of the hardest places for lenders to improve the end-to-end customer journey, for a key reason: the mortgage market is dominated by intermediaries. This often makes the broker's/advisor’s role the most influential in the customer journey and not the lender's. So even with improvements to the front end, there are often issues when it comes to conveyancing.
Given the number of third-party entities in the mortgage value chain, the significant use of paper, and the fragmented nature of the systems; automation can play a key role in providing short term improvements in operational efficiency and staff productivity, in addition to longer term benefits, such as:
Look for a technology automation partner that can provide:
Despite the advancements made so far in the mortgage industry, such as speeding up the customer experience at the point of application using digital technology – for many lenders, analogue processes, legacy systems and technology still present a "triple threat" to transformational change.
“Paper, post, phone and fax, not to mention manual rekeying, still define the process of getting a mortgage in the UK, whether you are a consumer, mortgage intermediary or lender.”
The biggest challenge for lenders will be in customer acquisition, as consumers expect personalisation, convenience and speed - so will naturally choose lenders who can offer this in a digital format. Mortgage lenders therefore need to make it easier for customers to do business with them - and they need to modernise their infrastructure in order to support this.
With over two-thirds of UK mortgages originating from intermediaries, lenders must improve the way they interact with these businesses. For example, offering online decisions in principle, case tracking and scan and attach document upload as standard.
“To survive, navigate and seize the upside of disruption, lenders must undertake a comprehensive and continuous business transformation, which enhances trust, embraces digital, fosters innovation, and instils customer-centricity”
- Michelle Howell
At EDM, we’re working with multiple mortgage lenders, including RBS and Nationwide, to transform their end-to-end mortgage journey and deliver significant cost savings and customer experience gains.
Our Mortgage RiskHub platform helps Mortgage Lenders to digitally transform their Mortgage Customer Journey by providing smart APIs that automate Income & Expenditure, Property Risk and Conveyancing; replacing manual tasks that take hours - with machine tasks that take seconds - thus enabling a real time digital customer journey integrated with the Lenders’ legacy systems.
Interested in moving your mortgage automation and transformation agenda forward? Speak to an expert in Mortgage Digital Transformation today.
Michelle Howell is an expert in the field of mortgage digital transformation solutions. With a career spanning 22 years, her early years were spent gaining experience in retail bank management, where she managed a variety of Natwest branches in the midlands. Her recent experience over the past decade has seen her deliver mortgage transformation projects at the Royal Bank of Scotland, supporting strategic programmes across the full end to end mortgage journey, introducing new digital technology and software solutions to simplify processes and enhance the overall customer experience. Michelle’s role at EDM began in Summer 2019, as the Product Manager for EDM’s Mortgage RiskHub solutions, responsible for understanding customer and market requirements, and translating this into new technology and innovative offerings from EDM Group to support our customers in the Banking and Building Societies sector.
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