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Will technology advances bring digital Darwinism for brokers? – Whitehouse

by: Phil Whitehouse, managing director of MCI Mortgage Club
  • 18/05/2018
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Will technology advances bring digital Darwinism for brokers? – Whitehouse
The Financial Conduct Authority (FCA) has conceded that technological advances within the financial industry could transform the nature of the mortgage market and cause lenders to become less dependent on traditional brokers in the future.


It has asserted that the advent of PSD2 and Open Banking are likely to ‘accelerate the digital transformation of retail lending business models’ and to engrain high levels of competition between ‘technology driven firms’.

This is expected to be particularly relevant to ‘mortgage intermediation and credit broking’ – hence the threat to brokers.


Benefits and dangers

Emerging technologies and the rise of artificial intelligence have already made a huge impact on the mortgage sector over the past few years.

They have sped up previously onerous processes (such as affordability checks and borrower applications) and helped to eliminate administrative and compliance work.

With significant innovations already in development or awaiting investment, it is safe to say that both the attendant benefits and paradoxical dangers of technology have become a source of much concern among brokers.

Projects likely to create the biggest impacts include digital verification technologies, blockware driven ecosystems encompassing all transactional documentation, and comprehensive one-stop consumer hubs.


Digital Darwinism

Indeed, it is easy to see why many brokers believe robo-advice constitutes the single biggest threat to their business and livelihoods.

But, can technology truly displace brokers from the mortgage process or merely affect those who fall short of requisite standards – a sort of digital Darwinism as it were?

Many experts believe the sheer volume and complexity of products and options within the UK mortgage market precludes a single-handed reliance upon technology, especially given that shifting economic and social landscapes are continuing to open up new demand for unconventional loans.

Straightforward applicants may find that their borrowing criteria can be adequately accommodated by existing tech-applications, but the same is unlikely to be true for customers with more niche demands.


Inadequate skill sets

So this is where an extensive knowledge of markets, lenders, policies and underwriting criteria comes to the fore.

Which is not to say that technology will not assume an ever-greater presence and influence within the sector of course.

And we should remind ourselves that so far not a single customer has completed the mortgage process exclusively via digital means (and is not likely to for a very long time to come either).

A greater reliance upon technology may arguably initiate a wider process of elimination among brokers with inadequate skill sets, but this is a natural (and necessary) part of any cost-efficient business model.

However, it can also provide a profitable and richly supportive role within the industry and this is what brokers must focus on.


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