By Pradeep Raman, Director of Digital Solutions, DPR Limited
The Building Societies Association recently invited me to take part in a panel discussion as part of its Digital Mutual event in London. The topic of the session, how digital innovation is disrupting the mortgage advice process, is one close to my heart.
In 2015, I set up a digital mortgage brokerage called Burrow which was inspired by US mortgage distribution firms like Rocket Mortgages by Quicken Loans and Better.com. These firms were providing customers seeking a mortgage a smoother approach to buying a home or refinancing a loan.
Pivotally, Rocket Mortgage and Better.com had not developed new technology to facilitate this improved customer journey. They were simply making use of the existing technology in the market to quickly analyse the customer and the property to make instant offers.
My aim was to do the same in the UK mortgage sector and innovate in a market that has resisted pretty much every consumer technology trend for the last 20 years.
Paper, post, phone and fax, not to mention manual rekeying, still define the process of getting a mortgage in the UK, whether you are a consumer, mortgage intermediary or lender.
For the end customer, it can be an opaque process. If you are trying to find out whether you can get a mortgage, you have to arrange a meeting with a mortgage adviser, get three months’ worth of payslips ready and fill in multiple documents and pieces of ID. All to potentially be told there’s nothing the lender or broker can do for you.
Is there a better way?
There is a simple answer to this question - absolutely yes. If you take the examples of the US firms mentioned above, they have created systems that makes it easy for potential borrowers to submit the required information electronically and get an instant underwriting decision. Income and expenditure, debts and credit scores are all automatically pulled into the system while algorithms work behind the scenes to build a set of personalised loan options.
These data sources are all readily available in the UK. With financial health data available through Open Banking and Biometric IDs rapidly becoming commonplace, the means to create a better overall mortgage journey for consumers, brokers and the end lender is here.
Digital brokerages like One77, Habito, Trussle, Mojo Mortgages and a number of others have started to engage with customers using digital channels, whether that’s mobile apps and social media. For the most part getting a mortgage still remains an analogue, paper heavy process.
But I genuinely feel the market is now at an inflection point in terms of the adoption of new technology, driven by the rapid expansion in the use of Application Programmable Interfaces (APIs).
In simple terms, APIs allow for the rapid transfer of data electronically and have been around since about 2000. The usage of APIs exploded with the advent of social media and smartphones in the mid-2000s.
Apps on your smartphone are transmitting data using APIs as you read this article.
We are still at a relatively early stage of adoption in financial services, but that is rapidly changing. API-enabled ecosystems are slowly gaining traction and are having a transformative effect on the market.
Digital inflection point
In 2018, my digital brokerage Burrow was acquired by DPR Group, which provides core banking software to a large number of lenders in the market, including many building societies. Since then we have been working to develop technologies to help both lenders and intermediaries improve the services they offer.
There is frequent concern voiced in the mortgage trade press about whether technology itself will dictate the future shape of how mortgages are distributed in the UK. But digitising the mortgage process allows firms to customise the process to the respective business models.
For example, one of our first clients has been the brokerage One77 which has used our customer on-boarding platform to provide its customers with an indication of their borrowing capability and eligibility for a mortgage upfront. The principle applies equally for lenders and a UK building society will be one of the first to deploy our customer-facing platform.
We are seeing a growing marketplace of firms starting to provide data that will speed this process up even further, from income and expenditure, know your customer requirements via a digital ID and conveyancing and valuation.
In short, we are on the cusp of a revolution in terms of the process of getting a mortgage. If we look to 2020, I predict it will be an exciting year as the mortgage sector finally catches up with other financial services sectors and fully embraces the technology that defines the modern world.