“Digital technology does not innovate, people do. Digital technology is not disrupting any industry, people are,” said IRESS principal mortgage consultant Henry Woodcock.
“Digital technology is the enabler. It enables people to innovate and transform their business, customer journeys and customer engagements. Rest assured, this is no fad,” he added.
Woodcock was speaking at the Building Societies Association (BSA) conference where he discussed how the mortgage market was being transformed by digital technology.
He revealed several lenders were already considering their options in preparation for an expected relaxation of the guided online advice rules by the Financial Conduct Authority (FCA), allowing lenders a step closer to ‘robo advice’ services online.
But there is more that can be done to improve the situation for customers.
“In practical terms there are two areas of the mortgage sales process we could look to to reduce friction,” he said.
“First, improving the customer experience through a multiple channel engagement. Second, streamlining operations to reduce costs through automation and workflow.
“But effective digital transformation must go beyond merely digitising processes as they stand. There’s no way to adopt new technologies without disturbing the established order – frictionless will mean reimagining the mortgage processes,” he added.
However, Woodcock was keen to highlight that the continued digitsation of the mortgage process would not mean the end of traditional advice.
“Aside from vulnerable customers, most applicants will require advice from brokers and from lenders,” he continued.
“However, those applicants who feel confident about buying a first mortgage or changing a mortgage we expect lenders to develop and offer smart, self-service online propositions that provide regulated, guided advice that direct more complex cases to the full advice proposition.”
This may not sound too unfamiliar from the present situation, where many of the main high street lenders have their own direct to consumer propositions already in place – whether advised or non-advised.
But even these can be difficult to navigate at times and still require many human interactions. While this can sometimes be beneficial, it can also greatly slow down the process and introduce more potential errors.
The new challenger banks are at the forefront of tackling this process which could see typical mortgage approval time scales drop from weeks to days, or even to hours.
Indeed, some are already getting close to this point.
Atom Bank director of retail mortgages Maria Harris told the conference that it had already completed a mortgage for one of its customers “from application to completion in nine working days with very limited manual touch”.
With the technology in place to accept uploaded documents from brokers and customers it was already technically possible for a customer to get an “instant offer”.
“If a broker packages the case really well and it’s got an automated valuation model, we can get a case to offer in 3 hours,” she added.
In some respect, brokers are already looking for a better process with technology at its heart – electronic uploading of documents was one key point raised in Mortgage Solutions’ last Marketwatch.
However, Harris was critical of the current standard homebuying process and suggested that would need to change significantly to cut time and complexity down for customers.
“Half of mortgage customers say getting a mortgage is more stressful than starting a new job or getting divorced – I think that’s disgraceful in this day and age,” Harris said.
She added: “The longest bit of the journey (even if we and other lenders can do instant), where the industry end-to-end journey needs to change is around valuations, searches and the conveyancing process.
“Because if you sat down and drew a process for seeing a house for sale and getting the keys to that house you would never design that process the way it works today. It’s the most painful customer experience that we could possibly have come up with and so many bits of systems that just don’t speak to each other.”
Open API technology is expected to make a significant difference for lenders.
But in reality, the next big step change may not happen until there is coordination with valuers and conveyancers along with digitised searches.
And this brings its own problems of dragging those industries out of their current comfort zones, something Atom is working on.
“We do talk to the conveyancing association, we’ve joined them as an associate member and are starting to have those discussions,” Harris continued.
“We speak to the Land Registry fairly often and they’ve got some digital testing going on – things like digital signatures on deeds. So there is a lot of discussion in the industry and its when that comes together things will actually change.
“It’s a bit of a case of turkeys voting for Christmas with that, but it’s the right thing for customers and it’s going to have to happen at some point,” she added.
Guide the process
Too often at present it appears the customer journey throughout the house-buying and mortgage process is not considered, or takes a back seat to the stuttering processes in the financial services industry.
Research questioning mortgage customers conducted by consultant EY over the last five years found the wishlist was long, but bringing together everyone involved in the process would please the most customers.
EY EMEA Financial Services head of digital advisory and customer experience Peter Neufeld told the BSA conference that customers wanted help “to assemble all of their allies”.
“They want help managing the process from end-to-end because its complex and takes time and they don’t want it to end when they close the deal. That’s the beginning of another journey they go on – they get left behind and we go on to next customer,” he said.
Neufeld also noted that customers did not always want regulated advice, but to be supported and assisted with their decision.
“We freak out about advice. We think of advice as this dangerous thing that would cause us to be liable for extraordinary fees,” he continued.
“But a customer thinks about advice as something very different. They just want someone they can trust to say ‘I think you’re going to be alright’, or ‘that’s a bad idea, I think you should try something else’, and we struggle to get comfortable doing that.”
And he warned that the industry needed to improve in this area as other non-financial services companies were moving in to offer these services, and that customers were already becoming happier to do use them.
“Your risk is how you stay relevant in the lives of customers – digital isn’t just about more sales but about getting to know your customers better.
“A lot of these organisations are now moving into the space. Google has licences to sell insurance in many US states, they are not going to wait for insurers to do it themselves,” Neufeld added.
One of the biggest risks for online financial decision making is ensuring the customer is sufficiently educated and competent to make the decision on their own, or with limited input.
Neufeld noted that as the complexity of the decision increases, customers naturally seek to find more personal advice and that they might want to do this by a variety of methods, not just face-to-face.
However, he also suggested that it should be possible through a range of techniques, including access to their transactional behaviour, to identify customers who were financially able to make their own decisions, or to slow down or divert others into a different channel.
But while all this technology can speed things along, Neufeld felt there were times when instant approvals were not the most important element.
“There’s something about having two weeks to process a mortgage that gives a bit of breathing room,” he concluded.
From changes already underway it is clear that brokers may have to accept different ways of engaging with their clients and should embrace these where possible.
Some borrowers may want to have more control over the process, uploading data and documents themselves, or even completing the whole journey alone.
However, there will always be a need for advice and many customers actively want advisers to support their journey.
It may just happen quicker and in a different way to what we expect at present.