Mortgage technology in 2019 - hype versus reality. Part 1

Technology based predictions often appear to veer from, “really” will that happen? to disrupting paradigm shifts that can catch traditional players out.

We should be wary of accepting every prediction. If you were born before 1990, you will probably remember the prediction that the modern world was “almost” going to end with the Y2K or Millennium bug. It didn’t.

For some time, we have heard commentators proposing that robots will take over the world, voice activation will replace keyboards and blockchain will remove transactional doubt and shred costs.

None of these has fully actualised, but elements are in play in the world of finance and other industries.

Turning to mortgages, what technologies will we see coming to the fore in 2019 and on into the 2020s? We keep seeing talk of fintech disruption, but has that really happened or is that hype from the burgeoning number of mortgage fintech start-ups? Also, will the FCA’s much-awaited mortgage market study change the direction of investment by lenders and mortgage technology companies?

Although the three main elements of the mortgage buying journey – consumer, broker and lender – have the shared objectives of buying or selling a mortgage, the technology gaps and needs differ. There is also a fourth element missing, which I will talk of more in a later posting, an underlying framework to join all the elements into a cohesive and dynamic ecosystem. But first a look at direct to consumer technology developments.

The consumer is king

Read any mortgage lender’s annual report and NPS or Net Promoter Scores will probably be mentioned. The index measures the willingness of customers to recommend a company's products or services to others and gauges a customer's overall satisfaction and likely customer loyalty. The oft repeated marketing quotes from the 50’s and 60’s was “the customer is always right” and the “customer is king”. Today it has morphed into the “consumer is king” and all consumer facing companies want to please the king and secure their business.

Brokers and lenders are both investing in consumer facing technology to increase their market share. Consumers, whether they are first time buyers or existing borrowers seeking a remortgage, want an Amazon like experience. If they are a returning customer, they don’t want to start from scratch, they expect a personalised experience where lender knowledge of their past activity and profile provides a tailored and more intelligent experience.  

Smart product sourcing, for the consumer and broker, where the likelihood of acceptance or decline is assessed using API access to relevant third-party data and services. In the latest iterations, AI (artificial intelligence) coupled with machine learning reduces the effort and time involved in the initial application step.

Although lowest costs seemed to be on the mind of the regulator in the early insight from the yet to be published market study, in an advice led regime, mortgage brokers will remain key to mortgage distribution, but many will need to invest in the latest technologies to stay in the game.

Those lenders and brokers that deliver intuitive, immediate, and inspired digital lending experiences will improve their ability to gain market share—and position themselves to win by delivering a better digital mortgage buying experience.

Next time: Do robo-advisors dream of digital mortgages?