Today, from the point a customer decides they want to buy a property, the homebuying process is characterised by unclear options, reams of documentation, slow communication – always including paper, and uncoordinated third parties, all equating to agitation and poor satisfaction.
According to the Financial Conduct Authority’s (FCA) most recent Mortgages Market Study, 30 per cent of consumers in the study could have found a cheaper mortgage with the same features.
Worst cases can include missing the completion date. Within the journey at the ‘discover’ phase for mortgages, online marketplaces such as Money Supermarket and Go Compare are reasonably effective at presenting product options, but are often poor at explaining the homebuying process and are usually simply lead generators.
Unlike Uber, for example, which facilitates the transaction and payment for the customer.
People-first design principle
Until now this haphazard journey has been accepted by consumers who have historically favoured face-to-face interaction at the expense of digital fluency.
However, behaviours and attitudes are changing.
The Payment Services Directive 2 (PSD2) regulation and the open banking movement has facilitated the sharing and aggregation of bank account data between companies. Today customers with current accounts and credit cards from different providers are able to easily see their products and balances in one portal – think Monzo and Yolt.
Neobanks are building marketplaces on their platforms giving users access to and suggesting products to satisfy non-banking needs. This is also being done by solution partners, such as Bud, whose upcoming app will leverage open banking to help users switch to cheaper utility bills.
These developments have all been made with providers making a shift to a ‘people-first’ design approach, rather than a traditional product push.
This has been part of a drive to address the expectation gap that customers have in financial services vis a vis other markets such as retail, travel, and media.
This liquid expectation of consumers is making them aware of the failings in the mortgages process, so they are looking for more. Additionally, from a business view, years of digital innovation in the banking and payments space is leading to that market rapidly becoming saturated, so players are now looking at other industries to enter into.
These conditions are driving change in mortgages. Online marketplaces are developing but will be just one part of the answer to the customer dilemma. At the heart will be a portal that integrates all aspects of the homebuying journey.
One-stop shop
Early iterations are being seen in companies like ClearScore, the free credit score fintech, where for mortgages, their Offers marketplace leads the customer through the London & Country broker site for fulfilment with lenders, pre-populating the majority of the online mortgage application pages with a user’s ClearScore financial data.
This leads directly to a decision in principle on the spot.
Another example is Habito, which offers bridge insurance to homebuyers to take them post-completion, so that a buyer can conclude the transaction then search for the right deal. This helps the customer meet their goal of owning a property, but avoids them becoming a ‘policy prisoner’ stuck in a bad deal that was a rushed decision.
Despite these advances, an end-to-end mortgage solution does not currently exist, with banks, brokers, and fintechs operating in at most two to three phases of the journey.
There is a need for a platform on which all parties can view, upload, update and communicate from the point the customer makes the decision to buy, to the handing over of keys and beyond.
Once a business is able to deliver this experience, it will not only disrupt current business models but quickly secure its position as a market leader.
