Digital transformation in mortgages: beyond weathering the storm

According to recent research, over half (52%) of consumers now demand a more personalised digital experience from their financial institution.

Demand for mortgages in the UK remains high

At the same time, the number of mortgage applications has increased and the demand for mortgages is showing no signs of slowing. However, Britain’s banks and building societies are failing to exceed customer expectations and capitalise on this ongoing surge in housing market demand.

While lenders initially predicted that the end of the Stamp Duty Tax Holiday would quell market activity, it is clear the market is still very active. In fact, mortgage spreads have hit their highest levels in seven years according to the Bank of England.

Though many lenders may have initially viewed the switch to digital as a necessity during the COVID-19 pandemic, customer expectations of their mortgage experience have fundamentally changed. Digital-first consumers expect the same level of speed, personalisation and service offered by other companies they interact with regularly.

In order to compete, institutions need to thoroughly review how customers engage with their services and look at how to deliver a more uniform experience throughout the entire lending process – from delivery of documents to final mortgage confirmation.

Reducing manual entry

Having access to the right data is crucial to providing an exceptional service. Recent data shows that nearly half (47%) of banking executives say they do not have access to the right information to deliver an exceptional customer experience, with 39% struggling to unify their customer data across platforms and channels.

Many institutions have turned to modular solutions built on different platforms that handle different parts of the origination process, and in turn, create issues like duplicated data entry and increased cost burdens.

Cost pressures are the main barrier organisations face when looking to implement new technology, but currently, the average mortgage origination cost is £4,000 per loan. Institutions that are reluctant to go digital because of cost burdens must recognise that the hours currently spent rekeying data into multiple systems could be directed toward more relationship-building focused activities.

Decreasing compliance risk

Industry regulations are becoming stricter, which is adding complexity and paperwork to the compliance process. Meanwhile, newer entrants in the industry often have automated compliance processes, such as electronic verification that provides them with operational advantages over industry incumbents.

While some financial institutions with legacy systems are understandably wary digital transformation might jeopardise the security of their customers’ data, the time savings offered by new technology secured in the cloud prove alluring factors.

Increasing flexibility

COVID exposed the flaws in many financial institutions’ operating models, which were unable to adapt to customer needs on the front-end, but also lacked unification throughout the organisation.

In fact, 78% of banking executives have stated their organisations were unprepared for the remote challenges of COVID and that it negatively impacted customer service. As a result, 35% of executives are now focused on improving their organisation’s resilience to future disruption through implementing new, agile technology that can better adapt to unforeseen market changes.

Uniting lenders and brokers

The surge in home buying has caused operational strains on both lenders and third parties, including brokers. With both the intermediary and lending sectors forecasting growth, partner portals can bridge the gap between third parties and lenders, fostering collaboration and reducing manual data entry.

Meeting customer service demands

In order to attract new borrowers, institutions need to be able to provide personalised products and services through their customers’ preferred channels. 33% of executives expect to increase spend on digital transformation projects that focus on improving customer retention.

The lessons learned from COVID are opportunities for many institutions to digitise existing inefficiencies to focus on providing an exceptional experience to existing customers and attracting new clientele.

Over a fifth (22%) of institutions are looking to increase spending between £1 million and £5 million over the next 12 months, according to recent research. And nearly three in ten (28%) are expecting a £500,000 to £1 million increase. The cost may appear significant, but in evaluating the adoption of digital technologies, banks and building societies must ask themselves, “what is the cost of doing nothing?”.

By seeking the right partnerships and technology, institutions can reap the benefits of effective digitisation by streamlining the journey for all parties involved in the mortgage origination process, including lenders, brokers and customers.