Digital mortgages: the opportunity for financial services providers
Experts are predicting an injection of energy into the housing market.
One of the highlights in the Conservatives’ election manifesto was a promise to double the number of first time buyers within the next five years. As a result of the election outcome, estate agents and economists are now expecting house sales to pick up considerably over the summer.
As an increasing number of Brits look to buy property, there will be a huge opportunity for financial services providers that offer mortgages. However, there will also be challenges.
Recent research by Accenture reveals a large majority of US banking customers (79%) define their relationship with their banking provider as purely transactional or commoditised, rather than advice driven. This survey also found that when taking out high-margin products, such as mortgages, over half of customers choose sources other than their primary bank.
So, what can UK banks do to avoid this problem and ensure their customers are coming to them for home mortgage loans, as well as their day-to-day and basic financial account needs?
The prominence of comparison websites makes it easier than ever for customers to shop around before taking out a loan, making it less likely that they will opt to take out a loan from their main banking provider. To differentiate themselves from the competition, banks need to ensure their mortgage offers stand out. One way they can do this is by simplifying the application process, making it as easy and stress free as possible for applicants.
Essentially, this process should be adapted to meet the needs and preferences of banking customers. The growing popularity in usage of digital tools has led to customers expecting to access their finances when and wherever they want. The laborious and long winded mortgages application process doesn’t reflect customers’ rapidly evolving expectations. According to our research, 45% of bank customers say the quality of a provider’s online services is extremely important to them when taking out a new financial product. As consumers rely on digital methods more than ever before, banks should be ensuring these a prominent role in the mortgage application process.
Barclays has recognised this. Earlier this year, it announced that it was developing a more automated and digital mortgage application system, saying that applying for a mortgage should be as simple and quick as shopping online. For example, in-branch advisers can now submit photographs of documents required for mortgage applications via a smartphone or tablet device, using the online submission system. This means cases can be resolved much quicker.
Mobile devices also provide financial services providers with a fantastic opportunity to keep customers regularly updated on the status of their mortgage application. The long processing time of home lending products poses a risk that applicants will be wooed away by competitors. This increased engagement is crucial given that the average cost for a provider of processing a mortgage application is between £300 and £500, a cost which cannot be reabsorbed if the customer becomes disengaged and walks away.
As well as speeding up the process, Barclays believes that introducing more automation will free up their mortgage advisors so they can focus on giving their customers financial advice. This is good news because as with any digital product, customer experience needs to be at the centre of the bank’s focus. More automation will mean more time for advice, which ultimately will result in a better customer experience.
It’s clear that digital technology has the potential to transform the mortgage application experience for customers considerably, making it not only quicker, but also more personalised. It will be exciting to see which other providers follow suit.