The unprecedented success of service-oriented companies such as Airbnb, Amazon and Uber has made it clear that for many of today’s customers, experience is a vital part of the product. While that does not mean that an inferior product can be hidden by wrapping it in a superior experience, it does reinforce customers’ growing preferences for unique experiences. The fintechs have tapped into this experience-driven approach to carve out a niche for themselves and get customer attention in a very short period of time.
Buying a house is one of the biggest commitments most people ever make – both financially and emotionally. And big usually implies complex. But does that mean buying a mortgage also needs to be complex? Why can’t it be made simpler like other kinds of loans? Why should a customer’s experience while availing a mortgage be any different from the experience of seeking a personal or auto loan? What would it take to make it possible to simply buy the house on Amazon and take delivery of the keys next day from a drone?
Clearly, there are substantial differences between a mortgage and a short term personal loan – mortgages are typically much larger and last for a much longer time. So the risk is greater. But why should a customer who has worked hard to maintain a healthy credit profile have to endure a cumbersome process which was perhaps designed to ensure that risky customers are identified and filtered. Also, if every bank is applying minor tweaks and replicating the same process, is there really any big differentiator in terms of experience? Is there really no way to re-define the process without compromising on the risk? What about the approach followed by fintech and big tech? As Steve Boland, Bank of America’s head of consumer lending says: “Buying a house is supposed to be a joyful thing and filling out 330 fields is not, I think, something that brings you joy.” Clearly, this highlights that the current state of customer experience in mortgage lending is far from ideal.
While digitizing and improving the current processes is essential, and as yet, most lenders haven’t been very successful doing even that, the transformation in mortgages shouldn’t stop there. There is a need to rethink the complete experience and design it from the customer’s perspective. In some markets, banks only get involved when the decision has been made and financing is required. Even when customers approach the bank early to find out how much the bank might offer them, it is still quite late in the overall process. What if banks engage with customers, much earlier, when they are just thinking about buying a home? If they did, then they would have a longer term engagement with the customer during the selection of the house, decision to finance, getting it refurbished, insuring it and moving in. The “era of experience selling” is all about redefining experiences. Amazon has created an enormous business by redefining the whole experience of shopping for everything from books to groceries. So why shouldn’t a bank think about extending similar experiences around financial services? Why shouldn’t a bank connect with customers before they decide to connect with the bank? This doesn’t mean that the bank needs to go beyond their core competencies in financial services, but rather to facilitate a strong and cohesive ecosystem which in turn helps customers buy their dream homes.
There have been some interesting examples focused on adopting new ways to engage the customers earlier. Barclays in the UK has deployed a homeowner mobile app, which allows you to search for-sale and for-rent properties over a partner network. And it goes much further, enabling you to call brokers, arrange appointments, estimate eligibility and the cost of financing and moving, connect with mortgage specialists and submit loan applications. Many other banks, including Chase Bank in the US and Absa Bank in South Africa offer similar mobile apps to help customers in their home buying journey. The eight minute mortgage approval experience offered by Rocket Mortgage from Quicken Loans was a unique attempt at digitizing the complex process. And it is working, as Quicken has now become the top retail mortgage lender in the US replacing the traditional banking giants. Many other non-bank digital mortgage lenders have re-engineered their processes, including SoFi, Roostify, Lenda, Trussle and Guaranteed Rate. Leveraging advanced technology and redesigned processes, Bank of Queensland in Australia has radically revamped its home loan business, reducing their “Time to Yes” by 99% while also reducing “Total Touch Time” by 85%.
However, as most banks are currently only able to fix some parts of the problem, they do not offer an experience which consumers can look forward to. Complete digitization is a distant dream for most. With customers addicted to their smartphones, the journey begins with a comprehensive, yet easy to use mobile app. Artificial intelligence and advanced analytics make it easy to put together customer details to personalize the app. Customers have shown that they are ready to share personal data if it helps enhance their experience and reduce the time taken for approvals. Once the identity has been verified by the user, personal info should be pre-populated – fulfilling the mantra “don’t ask the customer for information you should already have or can easily get” from a government ID or any other connected platform/social site. In many countries, once approved by the customer, the income details can also be verified and integrated based on the income tax filing history. The personalized app should offer tailored and relevant options for home search. The details on properties should make it easy to get peer reviews, track locality, set appointment with dealers and get update on cost / applicable financing options. Once the user has selected the property, it should require only a few taps to complete the application and get approvals. As an option, users might be able to have a voice / video chat with a mortgage specialist to get a better understanding of the financing options.
Apart from enhancing customer experience, the digitization of mortgage processes will also help minimize errors and improve operational efficiency with data driven insights from analytics. These insights incorporate traditional data sources such as income details, transactional data and credit bureau reports along with alternate data sources such as social media profiles, mobile usage and utility bills. They can improve credit risk assessment and loan eligibility calculations while allowing lenders to offers customized offers. The rich analytical insights from data mining could well be used to know the customer, understand his/her preferences and priorities, anticipate the need of a prospective mortgage buyer and come up with a tailored loan offer that is not just personalized but also realistically easy to avail. Enabling customers to complete the home loan application process over the channel with which they are most comfortable, without disrupting their work, would go a long way in overcoming the barriers. With artificial intelligence and geo-tagging capabilities, it is easy to drive innovation around aspects such as verification of personal data and property ownership. Leveraging technological capabilities can help the lender be with the customer throughout the home buying experience and facilitate seamless transactions. With the front-end delivering a customer friendly experience, it is vitally important for the processing engine to keep pace and be in sync, otherwise the experience is destroyed.
While it seems pretty obvious, lenders tend to forget that the customers don’t buy a mortgage. They are fulfilling their dream to buy a home and the mortgage is just a means to that end. While the bank may believe that the home buying experience begins from the application and lasts until disbursal, for the customer, it is a small but complex and worrying part of their overall experience. If a lender can make its presence felt, in a helpful way, across the entire journey, helping them to fulfill their dream faster and more effectively, it will certainly be a meaningful transformation of the mortgage.