Speaking to Mortgage Solutions, founder and chief executive officer of digital adviser Burrow Pradeep Raman argued the technology in the digital advisory space still lacks the necessary sophistication to provide the fully automated end-to-end mortgage service envisioned by talks of ‘robo-advice’.
However, Raman said that this is by no means a death sentence for digital advisers – because the tech platforms developed by the various online brokers could automate and streamline all the other parts of the mortgage process – leaving intermediaries free to perform the “most valuable” part of their role in giving clients advice.
Raman suggested that digital advisers cannot provide a platform that fulfils the entire mortgage journey because the tech cannot yet perform the adviser’s role in recommending the best product for a particular client – especially when the client’s circumstances become more complex.
“Nobody has invented a complete end-to-end digital journey at all,” said Raman.
“The journeys [for digital advisers] are the same, they give you a certain level of estimation or recommendation online, but you still have to speak to a broker before you go forward and get the final bit of advice,” he continued.
As lenders’ eligibility and affordability criteria are not standardised, Raman said the sourcing tools used by digital advisers are not accurate enough to stand on their own – meaning that human brokers are ultimately necessary.
Raman said: “There isn’t a standard set of parameters that lenders will judge applicants against for their products.
“There is a degree of variation between lenders’ criteria, so it’s harder to create a centralised system to assess what each lender requires against each parameter.
“This means the accuracy of the eligibility output given cannot be 100%, you might get an idea of what products you can get and who will offer them to you, but you still have to speak with a broker in the end.”
The glow of B2B
Burrow made headlines earlier in February when it axed its consumer facing side over ‘unit economics’ problems and overhauled its business model into a B2B offering.
“Every broker, network, and lender all have begun their digital transformation journeys over the last couple of years – so why can’t we work with them to provide the software suites that we’ve built?” said Raman.
The startup now licences one or a combination of its propositions to brokers, lenders, and networks alike – including digital user onboarding, customer relationship management (CRM) systems, automated product recommendation, a form filling platform, eligibility and affordability calculators, as well as other tools in development.
However, Burrow is not the first to convert from a consumer facing to a business to business strategy.
MortgageGym, for instance, uses its proposition to generate verified leads to broker partners.
It offers a consumer facing portal that estimates how much and from which lenders a person could borrow, and a form filling function that asks for relevant information which is then verified through credit reporting agency Experian.
But once the information has been verified, MortgageGym refers the customer, now lead to its panel of external partner brokers.
“We are combining tech with personal advice,” said Jeremy Moll, managing director of MortgageGym.
He continued: “Our hybrid offering provides consumers with direct access to brokers who are equipped with all of the information they require to make a final product recommendation quickly and efficiently.
“We pass them to a broker who provides the soft skills and questions, and who ultimately recommends the product – because research suggested a large percentage of consumers still want to speak to a human being and get that hand holding.”
MortgageGym has three in-house brokers for the purposes of research and development, and has external partnerships with 40 advisers.
Like MortgageGym, Habito offers a consumer-facing proposition that digitally completes the fact find, then passes the customer to its in-house brokers for a check and full advice.
However, Mortgage Solutions understands that Habito is currently “very interested” in developing deeper integration with lenders, and is in talks with a number of retail banks to pilot real-time submission and real-time case tracking schemes. The broker did not confirm whether this was Application Programme Interface (API) technology or not.
“The vast majority of lenders don’t have the engineering resource to produce more customer focused digital technology so that’s where we can come in,” said Daniel Hegarty, founder and chief executive officer of Habito.
Hegarty continued: “The industry has been untouched by technology in over 30 years and is neglecting the needs of today’s consumers.
“We use machines to do the repetitive work they’re good and incredibly accurate at – form filling, document collation, product research – this frees up our mortgage experts so they can add the most value, answering questions from our customers, looking at cases that aren’t straightforward and guiding people through the process.”
“They’re basically AI-powered people,” Hegarty added.
A spokesperson for Habito declined to confirm whether these pilots would allow customers to submit cases directly to lenders without the advice element, but said that it will update the market “in due course”.
Habito currently has a combined 28 brokers and case managers on board, and a spokesperson added that the firm is hiring for roles.
Ishaan Malhi, founder and chief executive officer of Trussle, said that while he recognised the potential opportunities in offering tech platforms to lenders and brokers directly, he saw the approach as a “distraction” from its consumer-facing proposition.
“We certainly have a value proposition to other parties. In the same way that our technology makes our brokers extremely efficient, it could make other brokers very efficient as well,” said Malhi.
Trussle currently has 15 advisers in-house.
He continued: “But they do come at a cost, and a thing that can kill early stage businesses is a lack of focus.
“Before you know it, the software you provide to other brokers requires its own support team – and that could be a huge distraction.”
Similar to Habito, Trussle currently has an in-house team of brokers, but Malhi was adamant that it will remain consumer facing.
Malhi said: “We will not be quick to pivot our business model because it fundamentally goes against why we started the business in the first place.
“My sole interest is in solving the industry’s problems and inefficiencies for the benefit of consumers.”
Instead, Trussle will be expanding into the consumer facing side by incorporating different services in the home owning journey.
“We’re trying to give a more holistic offering of services which would include things like insurance and conveyancing,” said Malhi.
“Mortgages are a means to the greater purpose of owning a home – you might make the mortgage process delightful, but there is more than one component in the homeowning process.
“As far as we’re concerned, it’s consumers that we’re solving the problem for, it’s not brokers and it’s not banks.”