The FCA says that PSD2 and Open Banking are likely to “accelerate the digital transformation of retail lending business models” and that new technology-driven firms will be competing for market share, particularly in the mortgage intermediation sector.
The regulator adds that it expects these technological developments to lead to mortgage firms “reducing their reliance on traditional mortgage brokers”.
In a separate document – its 2017/18 business plan – the FCA has laid out its key aims for the year, one of which is around technology and looks at promoting competition and innovation and developing robo-advice services.
Not black and white
As those who have read my columns before will know, the increasing use of technology in the mortgage advice sector is an issue very close to my heart.
I am all for technology that helps and assists in our lives, and there is no doubt that technology and online has transformed the retail and banking sectors.
However, when it comes to financial advice, it is not so black and white and the individual customers’ need should always be at the forefront.
There are certain areas of finance which I agree can be completed entirely online, with no advice if that is what the customer prefers, for example, buying car insurance, or online banking.
And, like the FCA, I expect technology to affect all financial markets to some degree as there is so much emerging technology that is shifting firms’ strategies and disrupting the convention.
Many consumers, particularly the younger generations, will opt for the greater convenience of online services, and may well prefer to deal with a screen rather than a real person. But we cannot assume that this is what all customers will want.
Technology almost certainly has a part to play, and from a broker point of view, using online platforms to quickly search on a clients’ criteria can save a significant amount of time and money.
In fact, we have already seen the positive effects that technology has brought to the process, whether that is lenders’ portals with real-time information on exactly what is happening with a mortgage case, online applications, automated valuation models (AVMs) and online anti-money laundering checks.
And I totally embrace this as it is speeding up the process and will only continue to improve it as the technology develops further.
However, I don’t believe that technology can take over everything.
In some situations, it is undoubtedly better than a person – for example checking criteria, but when it comes to offering tailored advice to a client or talking about the importance of protection, technology doesn’t have a patch on face to face.
A mortgage is the biggest and most significant financial commitment most people will ever make, and the reassurance you get from talking through your options with a real person cannot be replaced by a computer.
I do agree with the FCA that technology will become much more important to financial services, but we need to tread carefully.
The recent data issues with Facebook has shown that relying on technology too much can be problematic, so we need to ensure it is only used if it actually improves the customer journey.
And while overall the FCA may be right in predicting that increased use technology will lead to a drop in the number of mortgage brokers, as far as we are concerned, the traditional face-to-face approach is here to stay.