The mortgage industry is set to change in ways most people can’t even imagine – and data is the driving force, Dr Louise Beaumont (pictured) told Mortgage Solutions’ Women’s Executive Club at its December meet-up.
Lending will be revolutionised in the so-called Open Future, as consumers and businesses take control of the data they generate, and share it with third parties to receive better service and products, according to Beaumont, who is co-chair of the tech UK Open Banking working group.
She warned the mortgage industry could be set for an Amazon or Uber-style moment where a technology-based company uses data and technology to provide a simple service that turns the market on its head.
Beaumont said: “It’s those firms who are unencumbered by the past, who have no stake in what has been made that can absolutely disrupt it.”
Brokers that actively use data and technology solutions – rather than leaving it “rotting in CRM systems and excel spreadsheets” – are among those most likely to survive in the long-term, she added.
The New Year ushers in the beginning of Open Banking on 13 January, where consumers will be able to share current account data with third parties – shortly reading across to savings and mortgage data.
However, not all attendees of the Mortgage Solutions Women Executive Club were convinced.
One executive said: “Do you have absolutely no qualms about sharing your data?”
Another asked: “How much would you really share your data?”
How brokers can leverage data in the Open Banking future
There are basic ways brokers could look to use Open Banking current account data and API systems to provide better service and make business more streamlined, according to Beaumont.
She highlighted “pain points” that intermediaries should look to address and change.
First, that consumers hate keying-in information for mortgage approvals – because it takes time and people today want instant results.
Beaumont said brokers should also be looking at how to retain existing customers and onboard new customers digitally.
She added: “That is one of the determinants which will help decide which intermediaries really survive in the long-term – taking away the personal interaction where it’s not needed and doesn’t add value.
“This is not to say that human advice isn’t relevant – it is, but it needs to be informed human advice.
“Why waste 90 minutes with each customer asking questions when you can generate the information instantly.
“It’s this focus on the advice – not data gathering- reducing the admin.”
Beaumont stressed that brokers typically sit on data from customers – only using it prior to deal expiry with no real contact or relationship building in the interim.
And intermediaries should also be looking at getting data ready for GDPR – the data act coming in May this year targeted to give people greater protection.
Smaller brokers, with limited capacity for IT employees or staffing, should consider how and where software solutions can help their business function, according to Beaumont.
The future is now
There is one company that could be about to deliver the mortgage industry its Uber moment – or at least create significant disruption, according to Beaumont.
Eligible.AI is an early-stage company trying to solve a number of market problems for both lenders and brokers – including those outlined above.
The company is creating a software interface or digital mortgage platform from which both lenders and intermediaries can serve their customers and which borrowers will be able to access.
Beaumont said: “I think they might have something interesting and you might want to keep a weather eye out for them.”
Aside from Eligible, incremental innovation in mortgages is already subtly altering the market and how borrowers interact with both brokers and lenders, according to Beaumont.
In the wider mortgage market there are broad areas where young or fintech companies are coming in with point solutions – although none of these companies appear to have propositions that are hugely disruptive, Beaumont said.
This includes market-based lenders who are using peer to peer models to provide funding; mortgage auction sites; mortgage processing and work-flow software solutions such as lender snap; analytic firms such as credit sesame; and digital mortgage lending and digital mortgage brokers such as Habito and Trussle.
In the not-too-distant future, mortgage-related companies are expected to adopt or already offer key data and technology changes.
Beaumont said: “These are tactical point solutions – expect other people to do them.”
For example, using current account data to pre-fill mortgage applications, as well as an alternative to credit scores.
Borrowers are likely to be helped to budget for mortgage repayments with ‘safe to spend’ calculations on current accounts, for example.
Lenders may also start to give the options of more frequent, fractional payments weekly, for example, rather than a monthly lump sum.
Current account data can also be used to make sure the mortgage fits financial behaviour.
Looking for opportunities
In the future, companies that use data to offer holistic and dynamic solutions are likely to be the biggest winners, according to Beaumont.
She said: “Imagine a future where I have shared data on my current account and insurance.
“And my insurer can see that I have bought tickets to Dubai and I’ve had my diving equipment serviced.
“So I need to be insured for the travel, I need to be insured for the dangerous sport and I also need to have my insurance adjusted for the fact that my car’s going to be in a locked garage, not being driven, and that my home’s going to be empty.”
However, an attendee wasn’t sure that consumers always appreciate being approached with new services.
She said: “It’s a very fine line between looking for opportunities and annoying customers… I go to the Post Office to buy stamps or euros and they ask: ‘have I got travel insurance, have I got a mortgage’. ‘Yes! Just give me the euros!’.”
Beaumont replied: “It is about getting them at the time of need or want. They are pestering you at a point when it’s not appropriate.”
She added: “If people keep thinking they can push out big dumb, products with no personalisation, they’re wrong.”
“The following piece about Eligible appeared in FinExtra on 12th September 2017. Click here to view the original article.”
Today new fintech start-up Eligible comes out of stealth with an offering that helps traditional mortgage advisors and lenders compete with the new influx of digital brokers.
Eligible has been in beta trial for the last three months with its first client and expect to announce new deals soon.
Eligible’s platform acts as a ‘digital enabler’, equipping mortgage advisors and lenders with the right tools to increase conversion and retention by strengthening their relationships with consumers.
Eligible, through its launch product “Mortgage Watch”, is targeting the UK re-mortgage market with a SaaS model, which it monetises through a monthly subscription plus conversion fee. The UK’s mortgage market is worth £225bn annually, 70% of which originates via intermediaries who earn an estimated £1bn in annual procurement fees.
Eligible’s Mortgage Watch, with or without any CRM integration, uses smart algorithms to carefully manage and analyse lenders’ and advisors’ existing client data, and identify when homeowners have the opportunity to re-mortgage. The algorithms analyse whole-of-market lender criteria to match consumers with the right mortgage product and creates real-time alerts. This means Eligible’s clients will never miss any re-mortgage opportunity for their consumers. Eligible’s white-label platform also empowers advisors and lenders to provide an end-to-end digital journey, which enables consumers to complete their applications seamlessly and effortlessly.
Looking to the immediate future, Eligible is in advanced conversations with a few top players in the property and mortgage lending industry. It has big plans for its software, including lender API integration that could allow its intermediary clients to offer instant mortgage approval, meaning the process could be cut down from a matter of weeks to just hours.
Founded by Rameez Zafar and Hasan Mustafa, both financial services executives with decades of experience working for the largest UK banks, Eligible is based at the Level 39 fintech incubator in Canary Wharf. It’s emerging from stealth mode after 12 months in development following a high six-figure angel investment in January 2017.
Rameez Zafar, Co-Founder of Eligible, said: “It’s our mission to make the mortgage process fast and simple for advisors, lenders and homeowners alike. We think the best way to do this is to take a B2B2C approach – enabling the thousands of experienced and trusted traditional advisors to use better digital technology and algorithms in their work. We describe it to our clients as ‘we do the robo, you do the advice’.
“Our clients know they need to digitise rapidly, because it’s what consumers are demanding as new digital brokers like Trussle and Habito have emerged in the past year or two. These startups will need to spend large sums of money to attract homeowners and overcome people’s trust barriers. Buying a mortgage is a major life decision and consumers, at some point, like talking to a human being about it. Our model helps digitise and shortens that process, making it faster and more efficient, and empowering the traditional advisors and lenders to stay ahead of the game.”
With the accessibility advantages of a cloud-based platform and the robust security features of an online banking system, Eligible keeps all data and information incredibly secure.
Everyone with a mortgage has experienced the frustration of needing to fill in the same information multiple times, often wondering why the various providers can’t just communicate with each other.
With the rise of digital mortgage brokers like Habito and Trussle, that question has a solution: to not use the traditional route if you want to cut out the hassle of filling in the same information for everyone.
But estate agents provide a very valuable link into getting a mortgage – after all, they sell over 95% of homes in the UK.
So how can estate agents make the process consumers experience more modern – and claim a larger share of the estimated £1bn of annual mortgage procurement fees?
Step in Eligible, a new proptech company offering to make any estate agent offer a Habito level of service.
Eligible co-founder Rameez Zafar says their solution called MortgageWatch starts by plugging into an estate agent’s existing customer data to “very quickly determine if there’s an opportunity for a customer to save money – including if they are eligible for the product”.
Zafar states the product is “in beta with several large networks” of mortgage introducers. [EYE heard a rumour that LSL are involved in the beta trial, but neither Zafar or his PR would confirm this.]
With a background in trading ‘structured credit’ for HSBC, Zafar comes at this problem from a technical standpoint of efficiency and speed of service.
Of the company’s origin, Zafar said its central philosophy “is about auto-filling and removing layers of data-gathering”.
On the importance of agents in this, he says: “The journey begins with the property – the mortgage is just a financial product that sits alongside and is something to which people attribute a lot of stress and paperwork.”
He adds: “Seamless integration is good for the entire industry.”
It means, he says, that a broker can dispense with re-quizzing for basic information and “focus on adding value”.
Zafar started the interview by referencing how consumers are “now accustomed to Uber and checking bank statements online” but that people still want to talk to people because “mortgages are a big deal”.
With £1bn of revenue to compete for, embracing software that empowers agents and brokers, Eligible could be what people actually want from the mortgage industry.
“The following piece about Eligible appeared in CEO Today on 12th February 2018. Click here to view the original article.”
The technology behind client retention
In virtually all industries, repeat business typically represents the highest quality business at the lowest “customer acquisition cost”. The mortgage industry is no different, where in many instances, the highest margin business is advising existing clients on remortgaging – because it’s those clients that cost the least to acquire and require the least amount of time and effort to complete.
Yet the institutional and systematic support for retaining – or, even better, maintaining – these clients’ relationships is often lacking. Technology, and a new breed of service providers to the mortgage industry, is developing quickly to overhaul the means of retaining these existing high-value clients.
Current house price trends are increasing the importance of remortgages
The importance of remortgaging business to advisers and lenders is being accentuated by the current house price dynamic, particularly in London and the Southeast., Remortgages have become a bigger part of the mortgage market as house price appreciation has slowed and the number of transactions has fallen. In fact, in the first quarter of this year, remortgages overtook “house buyers” as the largest category of borrowers.
Rising interest rates may prove a catalyst to remortgage
At the same time, interest rates remain near record lows, meaning many borrowers would benefit from remortgaging – although the tables may be turning…
Recent indications from the Bank of England suggest that it will increase its Base Rate before year end. Swap rates, upon which mortgages rates are typically based, have already increased substantially to reflect this: 5-year swap rates have moved from 0.5% to 0.75% over the past two months . Rates remain extremely low by historical standards, but they have begun to move higher – providing a catalyst for borrowers to remortgage now.
As interest rates have kept falling in recent years, despite repeated proclamations that they are “as low as they can go”, consumers have perhaps felt that it is their interest to wait to remortgage. However, if the current uptick in interest rates continues and particularly if it is spurred on by a high-profile move by the Bank of England to increase its Base Rate, consumers may see rising rates as a catalyst to remortgage “before it’s too late”. In short, the friction created by changing interest rates is likely to spur demand for remortgages.
The increasing impact of technology
The conclusion from all of this is something that the mortgage industry – indeed many industries – has always intuitively known: customer retention is important!
The good news is that technology, when deployed properly, can provide transformative support to client retention. From ad-hoc digital engagement that keeps an existing client “warm” to systematic, timely prompts so advisors know when to proactively re-engage customers that would benefit from remortgaging, technology can help efficiently harness this pool of high-quality, repeat customers.
Many of these approaches draw on lessons learned in similar industries, like financial advisors or wealth managers, including some of the tools associated with robo-advice. “Fintech” service providers now entering the mortgage industry are focused on digitizing parts of the industry that will benefit from the efficiency gains of increased automation.
But it’s not just about providing customer management services to advisers and lenders. Technology is here to improve the customer journey: to make the interactions with the providers of mortgages more impactful – and simpler. As customers utilize better, more digital experiences in other industries, they will come to demand of it of mortgage arrangers and providers. The mortgage industry must meet that demand, or incumbents will be challenged by new entrants that will.
The human adviser will remain at the heart of the relationship
One-to-one advice and a tailored product offering based on a true understanding of a client’s needs are best achieved under the direction of a real person. The technology is here to make that person’s job far more efficient than it has been in the past.
By utilizing the appropriate technology, advisors and lenders are able to craft an appropriate hybrid approach: one that encompasses both the efficiency gains of technology and the unique benefits of the human touch.