Mortgages Special Interest Group 19/03, Manchester – Event write up
Members of the northern mortgage community gathered on 19th March to network and discuss FinTech and innovation in the mortgage market, a huge sector within the financial services industry and one that is going through an exciting phase of digital development.
Julian Wells, director of Whitecap Consulting & FinTech North, opened the event with an overview of FinTech North, which has now delivered 32 events which have attracted over 3400 registrations from more than 600 companies. He told us about the upcoming Manchester conference on 17th April. The conference will feature a content stream on SME Banking as well as a showcase of Manchester FinTechs.
The audience then had a brief welcome from Steve Robb, Financial Services Partner at EY, the hosts of the event. EY are currently producing their bi-annual FinTech census, the results of which will be announced later this year. FinTech North has been promoting the census over recent weeks and it can be completed here.
Michael Walker, Associate Partner & Teresa Schrezenmaier, Director – Strategy & Customer, EY
In the opening session, two EY speakers set the scene for the event with an overview of the mortgage market landscape.
Michael Walker provided insight on the current market, and identified how the mortgage market has had little growth in recent years and is ripe for new models and processes that can disrupt the market.
“Some of the tech that can be applied now in the mortgage market, is just being much more democratised. It is much more readily available to lenders now than it was just a few years ago.”
Michael then moved onto consumer demographics that are currently under-served in the mortgage market, namely being the young and the old, and began to describe the opportunity that this market segment presents for innovators in the lending industry.
“Lots of people are trying to address this problem, the EY view is that no one has really cracked it yet. But people are definitely looking at developing solutions in this space.”
Teresa then took over from Michael to tell us about underserved demographics and the challenges and opportunities those segments hold for lenders.
“The lending industry is largely driven by market metrics, figures and data that is not aligned to a customer’s world. A customer’s questions are much more in reality around house prices, and affording a mortgage.”
Teresa told us about 6 typical customer profiles that would come into difficulty in the current mortgage process. Each of these profiles, across a range of ages, would see difficulties in their mortgage application for different reasons. For example, the youngest demographic may not have sufficient credit history, a self-employed demographic might not have a steady income, and older demographics could be too close to retirement.
Teresa then moved onto the solutions that need to be developed to serve these more complex demographics. These were split across:
1. New products and propositions – targeted to specifically to these demographics.
2. Risk Models and affordability assessment, and using new forms of customer credit data.
3. Updating lending policies and criteria.
Ricky Johnson, Head of Strategy & Proposition Computershare Loan Services
Ricky from Computershare was up next to speak. He began by explaining how Computershare serves lenders along various points in the mortgage servicing process, and went on to identify the key issues in the lending industry and the tech that may be able to help with these challenges.
Some of the key issues are: Mortgage prisoners (trapped borrowers), later life lending, new lending and customer retention, arrears management (with focus on vulnerable customers), and servicing efficiency.
Ricky also discussed the tech solutions that can help, which include: Open Banking, Data analytics, APIs for new lending ecosystems, Multi-channel customer engagement, Process efficiency and AI.
Ricky concluded with a summary of current tech developments in the mortgage industry:
- NOW: customer self-service channels, digitisation comms
- SOON: API layer lending ecosystem, affordability and open banking.
- LATER: blockchain (exploration of use cases), enhanced customer comms (videos, AR), and QA automation.
Richard Hayes, CEO, Mojo Mortgages
Our next speaker was Richard from Mojo Mortgages – a north-west based mortgage FinTech that offers a fully digital online mortgage application process and an API-driven partnership platform.
He provided an overview of the Mojo offering and covered some key challenges they are looking to address. Mojo launched in 2018 and has sold over 1000 mortgages. They have reduced the average advice time to 27 minutes and reduced time to offer by over 40%, but despite their proposition being tech-driven, the mortgage advice element is a hybrid offering which involves their advisers speaking to the client, rather than the customer journey being fully automated.
“The vast majority of first-time buyers massively value being able to actually talk to someone to get advice on their mortgage. So, although we are a technology led business, its technology to empower individuals.”
Richard moved onto more recent Mojo developments, namely their partnership platform which allows them to attach their offering to lenders processes, taking care of the whole digital onboarding process.
“Safe, vanilla borrowers are maybe 50% of the market. There are huge groups of customers that have additional needs. So, to make an impact in this sector, what you are delivering needs to be for everyone.”
Zoe Cuthbertson, Wired Plus
Zoe was our last speaker, with an impactful presentation that focused on marketing automation and data optimisation in mortgages. She began by identifying the key challenges in the mortgage market, namely increasing acquisition costs alongside decreasing loyalty and brand power.
“Consumers are drowning in choice for mortgages. Innovation is the way to stand out.”
Zoe made the point that many lenders may focus on simply increasing the number of customers coming through the door, when in fact delving deeper into current customer experiences and delivering the right communication at the right time is a much more profitable route.
“Getting to the point of winning a new customer is important. But more important is how you then handle that relationship moving forward using insight and data.”
Zoe then explained how core customer needs revolve around ease, trust, cost and how a balance of these three elements establishes what customers value. Providers need to ask four key questions: Who are we targeting? What are they interested in? What do they value? What do they have in common?
Identifying these value drivers, prior to developing products and propositions, ensures providers align their offering accordingly to ensure profitable growth.
The presenters then gathered for a panel discussion and interactive Q&A. Andy Thompson from Sandstone Technology joined the panel. Sandstone is a 22-year-old Australian FinTech that processes a quarter of all mortgages in Australia and has been active in the UK market for a number of years.
Topics covered in the Q&A included: regulatory challenges, competitive advantage, risk appetites, innovation, and technical adoption.
On regulatory challenges expectations:
“The mortgage market is heavily regulated and we are seeing more drivers from the regulator for the lenders to look after vulnerable customers and those going into arrears, namely by making sure the channels are there to communicate effectively with them” – Teresa Schrezenmaier, EY.
“The regulator is also very much behind the education angle. So, businesses that help consumers really understand choice and what is suitable for them, the regulator will be comfortable with, even if the offering is new” – Zoe Cuthbertson, Wired Plus.
On creating value:
“Much of the innovation we are seeing in this sector is coming from the building societies, because they are more motivated to serve these different customer groups” – Richard Hayes, Mojo Mortgages
On helping brokers become more digital:
“I think ultimately you need to make that tech as easy as possible to use. Brokers have used the same tools for a long time so you can’t just expect them to overhaul their work processes” – Andy Thompson, Sandstone Technology.
“Improving systems for advisors is really important. But also, there is an attitudinal change that needs to happen as brokers are traditionally just anti-tech. The ones that will win and will stick around are those that deliver high quality advice, executed well. Practically, those that don’t start using things like document upload features will get left behind” – Richard Hayes, Mojo Mortgages
FinTech North’s next event in Manchester is the conference on 17th April 2019. Read more about it here.