In today’s evolving digital landscape, lenders are finding themselves increasingly vulnerable as the competition in the financial services domain is fully powered by rapid adoption of new technologies that are constantly evolving. A research report by Celent found that more than half of banks and 75 per cent of building societies are planning substantial overhauls to their mortgage origination systems in the next 24 months in order to keep up with heightening consumer expectations and changing regulatory requirements. With the need for fully digital customer experiences, financial organizations must compete for the lowest number of clicks and the potential to open an account, or issue a loan, in a matter of minutes.
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As the mortgage industry undergoes transformation, lenders must take crucial steps to future-proof their businesses. But, what exactly does this transformation entail, and how can lenders ensure they remain competitive in this digital era?
Make Way for the Technology-First Approach
There are several factors that have accelerated the digitalization of mortgage lending. One is sparked by the change in consumer behavior: customers have come to expect smooth digital experiences across all areas of their life (accelerated by the pandemic). As such, they seek ease, speed, and efficiency when it comes to home buying.
Then there’s the arrival of fintechs.
Newer fintechs are beginning to enter the mortgage sector – often through acquisitions, such as Starling Bank’s acquisition of Fleet Mortgage or Zoopla acquiring YourKeys. They are also bringing with them innovative digital solutions, which raise the bar for the whole industry.
At the same time, regulatory changes are helping accelerate and facilitate digitalization, such as the Bank of England’s decision to withdraw its affordability test recommendation and cut some of the red tape around mortgage lending, and HM Land Registry’s acceptance of electronic signatures. The combination of these forces have played a significant role in accelerating the lending process and making it more efficient.
Today’s financial institutions are offering a wide range of digital options, through online and mobile platforms, to their mortgage customers. Services include easier ways for customers to access and manage their mortgages, schedule a session with a mortgage advisor, find personalized recommendations, and access improved security measures to protect sensitive customer information.
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That’s not to mention the embrace of open banking, which has enabled seamless integration of customer data into the lending process. This innovation is helping reduce the number of steps needed to collect data and resulting in faster processing times, less relying of information and lower origination costs.
Offering faster loan decisions with less resources is a crucial advantage in an increasingly-crowded mortgage market, and automated processes reduce teams’ manual work and eliminate costly human errors.
The Tools Lenders Need to Succeed
Mortgages are a complex and highly regulated lending product that require an ecosystem of seamlessly integrated applications in order to provide flawless, delightful customer experiences and high operational efficiency for the lenders.
The success of new products and processes relies on the way mortgage lenders introduce, integrate and configure interconnected products. Agility is key – lenders need to prioritize composability, configurability and scalability when building products and choosing technology partners. They must be able to quickly launch new features or make adjustments, in line with evolving customer expectations, emerging trends and changing industry regulations.
The use of software-as-a-service (SaaS) platforms that offer a wide ecosystem of proven partners and excellent means of integration, like good API (application programming interface) coverage, helps with this, allowing for faster feature launches and less internal friction and maintenance costs. Fintech SaaS platforms are just one part of future-proofing the mortgage market.
According to Forbes, 55 per cent of senior executives in the US mortgage industry think that AI will make their firm, and the industry overall, more competitive. AI and machine learning can assist lenders in analyzing data more quickly, leading to more efficient decision-making and forecasting, although as with all AI applications, providers must be vigilant about encoded bias that can radically increase discrimination.
Staying Ahead of the Curve: What’s Next for Mortgage Lenders
Lenders must embrace lending automation and infuse customer-centricity at the heart of their services. As the mortgage industry continues to evolve, it’s imperative that lenders look favorably upon digitalization to keep pace with the competition.
This way, they can unlock the advantages of streamlined processing and retain satisfied and loyal customers.
The borrowers of tomorrow deserve a lending experience that epitomizes seamless efficiency and unparalleled care, and it is within the power of forward-thinking lenders to drive this transformative offering for the foreseeable future.