By Guy Johnston, account executive at Backbase
Banks must act now to digitalise mortgage journeys and bring them into the 21st century. Currently, poorly run administration and using multiple systems to find basic information, alongside the traditional siloed structure of banks have all led to an inefficient and long-winded process, causing problems for customers and employees alike. As domination of the first-time buyers’ market passes to millennials, a generation brought up on innovative technology and digital benefits, what has worked in the past for banks is no longer good enough, and banks must look at mortgage journeys as a priority to ensure that they keep customers and increase their profits.
A product line left behind
Banks and other financial institutions have spent the last decade investing in digital transformation, ensuring that the seamless digital experiences that their customers have come to expect in all parts of their life extend to their banking experience – from opening a savings account to accessing customer support. This has been significantly accelerated by the proliferation of neobanks and fintechs, who have set a new standard for digital banking experiences.
But there is a major anomaly in banking’s digital revolution: mortgages. In a recent report from GlobalData, it was found that in the UK, traditional incumbent banks still control 77% of the mortgage market, with long-established building societies continuing to play a huge role.
This is hardly a surprise; the mortgage market does not interest fintechs. Business models based on mortgages are typically cumbersome, with capital being locked in for long stretches of time. Fintechs want to be able to quickly adapt their business models to encompass innovative technology and react to new customer expectations and changes to the market, staving off new competition and staying at the top of their fields. They may struggle to see the possibilities of this within the unadventurous mortgage world.
Moreover, mortgages are often hard to understand and an important decision in any person’s life – it’s something they will be paying off and accounting for in their budgets for many years – making the face-to-face advice that they receive from intermediaries and banks’ employees themselves invaluable. The importance of this personalisation is unlikely to be replaced.
But that doesn’t mean that technology doesn’t have a significant part to play in the mortgage journey. Many of the inefficiencies associated with mortgage journeys could be significantly improved by digitalisation without sacrificing personalisation. Sending a photo of personal documents along with a selfie, receiving updates digitally instead of through post, and video calls instead of in-person meetings, for example, could all help to streamline this journey.
For many banks, the opaque nature of mortgage journeys is often a significant source of friction.
On the customer’s side, the fact that banks are still using methods like faxes and letters to send updates means that they often don’t know the stage of their application or how long it will take to complete the process. This leads to high call volumes, lengthy completion times, and above all, increased stress for customers over a decision with long-term implications – aggravating incumbent banks’ reputation for poor customer engagement.
And for bank employees, things are no less stressful. Legacy IT means that they must navigate numerous different systems to find the correct information, resulting in preventable inefficiencies and errors while adding time to an already tedious journey.
At Backbase, we believe that the only way banks can overcome these inefficiencies is by digitising processes holistically across all products and business lines, breaking down silos—and making this digitalisation a priority. This will ensure a seamless, company-wide strategy that brings together all aspects of the bank’s offerings, with a focus on orchestrating value around the customer rather than around financial products.
In doing so, they will not only be able to enhance customer satisfaction and increase customer loyalty and retention, but will also maximise efficiencies, improve their profit margins, and empower their employees to deliver better, more personalised service.
The incentive for banks to improve mortgages is primarily financial: the more efficient the journey, the more customers they can process in the same time period – achieving a greater profit.
Banks do not need to overhaul the entire mortgage journey; they simply need to shift their perspective and focus on replacing the siloed, disconnected approach to customer service with a single engagement banking platform strategy across the whole organisation. The traditional organisational structure of banks, defined by product and business line silos, has created several problems, and has led to poor customer engagement. A holistic engagement banking platform, however, allows banks to focus on reusability, providing a system where the benefits of digitisation can be felt across the bank’s products. It helps financial institutions digitise all customer interactions over time, rather than dealing with them case by case.
An engagement banking platform also enables and empowers bank employees to provide a first-rate customer experience, helping them to gain a full view of each customer and their interactions across all the products that the banks offer. Having easy access to customers’ documents, data and past interactions across all products will help lower operating costs, increase efficiency and keep customers with the bank.
In other words, by implementing an engagement banking platform, banks can improve their cross-communication and provide a smoother journey to customers, meaning they are more likely to retain and attract customers – while finding meaningful opportunities to grow their business with them.
The banking sector is experiencing significant disruption as more and more innovative fintechs and neobanks come on the scene – and traditional banks needs to act now if they want to remain competitive.
A single, common engagement platform orchestrating all products and touchpoints for both customers and employees is part of what has brought so much success to disruptive technology companies such as Uber and Netflix. This platform approach is the very key to banks’ ongoing success as the financial services industry continues to evolve.
An engagement platform approach will have particularly tangible and effective benefits for the mortgage market. If banks are able to improve their digital offerings and remove the preventable inefficiencies that we have become used to seeing across this industry, they will be in a strong position to capture the growing market share of millennials and satisfy their desires in bringing digital benefits across all aspects of their lives.