Guest blog: Moving mortgages forward

Guest blog by Richard Morgans, General Manager, UK&I, Mambu

Guest blog by Richard Morgans, General Manager, UK&I, Mambu

Homeownership is a life goal for many. Yet first time buyers often face a number of roadblocks along the way. On top of financial challenges, customers often have to navigate complex and lengthy application processes to make this significant investment a reality.

Building societies can undoubtedly play a pivotal role in relieving some of the barriers of homeownership. By adapting new technologies and shifting to more customer-centric approaches, they can create full transparency and flexibility throughout the home-buying process. Those that do this will thrive as consumers flock towards agile, digitally-native providers. To better understand the challenges building societies face, and identify potential solutions, Mambu conducted a study on current lending practices in partnership with Whitecap Consulting.

Drawing on interviews with senior leaders at ten leading mortgage lenders and building societies in the UK, the research offers a useful snapshot of the end-to-end mortgage journey and what lenders can expect to see on the horizon.

Legacy processes will only move lenders backwards

As society transitions to the digital world, it is imperative that legacy systems like those often used by building societies, reach true modernisation. Customers increasingly demand fast processes and the ability to track application status - all whilst accessing a user friendly interface.

Our study illustrates this growing issue, as nine out of ten function heads reported that their organisation had little to no automation in place. Many specialist lenders still lean on human underwriting to support their lending decisions - because human touch is a key pillar of the customer experience they offer. Building societies should hold onto this personalised approach but, in order to move past outdated systems and complex processes, they must consider adjusting towards a digital journey.

The manual nature of legacy systems is vulnerable to human error, ultimately leading to compromised data. Issues such as duplication and inaccurate entries can result in slow complex processes for regulatory compliance. Meanwhile, systems that are integrated without proper API capabilities make it difficult to extract data and deliver new micro-services from legacy platforms.

Customers expect the slick and seamless

On top of creating expensive inefficiencies, outdated processes are impacting the customer experience. From the moment a customer signs up for a new product, confirmation may take two to three weeks - often due to complex internal systems that don’t align with marketing and communications. As a result, customers are bounced between digital and physical touchpoints when lenders don’t have the right processes or security in place to fulfill requests in a single channel.

Customers are left with a lack of choice due to legacy infrastructures. And despite building societies announcing record-level mortgage lending, to stay one step ahead they should look to diversify their services. The ability to build new products on the fly without taking on excessive costs or risk is key.

True flexibility requires lenders to deploy microservices and test them continuously, until they reach the right result. And while back-end configurations can be tweaked, the structure of these services remains fairly static - making it a challenge to rebuild. In most instances, there is no access to APIs to carry these changes through. This means that product-level changes, such as introducing savings pots or goals, would require a core banking system change - and this can’t happen overnight.

Automate and imitate

Mambu’s Making Mortgages Move Forward report shows that legacy systems are simply not able to deliver the levels of functionality and innovation that today’s homebuyers desire.

However, this doesn’t have to mean that traditional lenders come last. Small changes have the potential to make big differences in the way they operate and serve their customers. A new generation of cloud-native, SaaS lending and banking platforms are available to revolutionise workflows and sky-rocket innovation within the sector. These solutions are being embraced by the likes of challenger banks such as Tandem Bank, who like many future lenders were previously legacy-driven but are now revelling in their new modern platforms.

SaaS cloud platforms use powerful APIs to connect and unify channels and third-party services, allowing lenders to build on existing brand trust to deploy products and services that benefit both their customers and themselves. By allowing automation to be applied throughout user journeys, lenders can reduce manual tasks to cut costs, time and potential errors - freeing up advisors to focus on advice over admin.

Imitating fintech's use of cloud-native solutions will not only provide more accessible and commercially competitive services but also bring them one step closer to digitisation. Let’s not forget, going digital is a journey, so we will see legacy driven providers starting to embrace change and adding more partners to their ecosystem. 

Adopting a composable banking approach is key

A core banking platform that embraces composability is the key to successful digitisation. This means flexibility in offerings and solutions by allowing best-in-class providers to come together to meet the unique requirements of the lender and their customers. Our study illustrates the biggest challenges traditional lenders face when it comes to digitising manual processes is that it’s too risky, expensive and time-consuming. Mambu’s composable approach to core banking allows speciality lenders like building societies to assemble the architecture that best suits their customer needs. All while enabling a faster time to market for new products and maintaining reasonable costs and risk.

It’s clear that there’s a need for change. And with competition fiercer than ever before, mortgage lenders who are looking to gain a cutting edge must rid themselves of legacy processes that are limiting innovation.

This means embracing digitisation instead of being risk averse. There’s no need for a system overhaul or building from the ground up - instead, lenders can compose their own infrastructure to drive incremental improvements.

The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.