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May 16 – Digital cometh

Any discussion on the digital revolution, must start with what impact technology and most importantly mobile and tablets will have on consumer behaviour.  It is important to recognise that there are only three key components in most property transactions.  There is the house itself, a customer and a lender.  All else falls off the back of these core participants.  The customer must be the fulcrum for change.

In any intervention in the property and mortgage market, the developer must be clear about who from the value chain this is designed to assist.  Solutions will impact a number of participants; the estate agent, surveyor, solicitor or conveyancer, lender, insurer, broker or consumer.  Development will have to be done in a way that smooths the journey, delivers better data and outcomes, and improves the value bring offered.  Value can be measured in a number of ways – price, certainty, time, quality, consistency or convenience.

Additionally, these are heavily regulated transactions and activities which require disclosure prior to commencing activities and good audit trails to evidence compliance.  From the customers perspective they are looking for a wide and complex range of assistance, from information, to advice and even support as they progress through the transaction.

The second core phase has to be to allow as much direct input of data and uploading of supporting information into the application and underwriting process as possible.  This should be capable of being developed for use both by brokers and consumers.  The use of Inland Revenue information and returns by direct upload, employer confirmations of salary, uploading of bank account data and credit bureau information would speed the administrative elements of the underwriting process.

The real challenge for the developers of today is how far they can go to deliver a genuine advice package.  Taking customer responses to term, rate type, amount, value of property, certainty, risk, and matching these to the priority of the customer is something the human brain can do, but requires complex algorithms to be built into software.  We already have Trussle and Habito with more to follow.  Whilst many will argue that these are not the real deal, they are the start of a journey.  All initiatives follow a bumpy road and it may not be the early innovators that win, but the followers will learn, adapt and improvise to improve.

In a world where 70% of mortgage transactions are initiated via intermediaries, the lack of any commonly agreed approach to data across lenders and their broker partners remains a barrier to innovation.  The need to be flexible to give each lender the data in their own structure will limit how far any digital provider can go.  Indeed all consumer research to date appear to want automation of the data capture and processing, but at some point in the product selection, virtually all consumers want another human to interact and provide confirmation that the solution being proffered is the right one.

However the largest brake on charge is still likely to be regulatory.  Whilst innovation hubs and sandboxes will assist in bringing change, there are risks inherent within lending that makes it a different transaction from investing or insuring.  The prudential regulator needs to have certainty that lenders’ capital is not being put unduly at risk.  The lender decision to lend will still have to be carefully assessed and the consumer remains tied for now to advice from a human.  The opportunity today appears to be automation of process, driving down costs – but we should not ignore that the consumer will dictate.


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