It is an unprecedented time for mortgage lending. Customers across the financial landscape have different expectations post-pandemic, and with low interest rates and the value of gross mortgage advances at their highest level since 2007, providing a responsive, personal and automated experience to take advantage of the market has become key for lenders.

To stay one step ahead, mortgage lenders need to look at the advances in artificial intelligence (AI), machine learning (ML), robotic process automation (RPA) and APIs, and adopt mortgage technology that will best help them meet customers’ changing needs.

In our latest insight, we examine five technology trends being leveraged across this shifting fintech backdrop, and their impact on mortgage lenders, the customer experience and growth.

1. Open banking increases access to financial data

In 2018, open banking legislation came into force in the UK, requiring banks to open up their payments data to regulated third parties of their customers’ choice, and increasing opportunities for SMEs, start-ups and industry players to create a new range of financial products.

For mortgage lenders, open banking is having a significant impact on the way they do business, helping to reduce the number of steps needed to apply for a mortgage and speeding up the loan process. It can also increase profitability by cutting admin costs for each individual loan application, by reducing the number of data points needed to be manually collected and evaluated.

For loan brokers, open banking automates matches between lenders and loan applicants, by enabling access to more information to make better lending decisions.

In the UK, open banking has helped accelerate the digital switch that has seen online banking services rise from 30 percent in 2007, to 76 percent in 2020. More than 3 million consumers and businesses in the UK now use open banking-enabled products, and future success in the mortgage area will depend on lenders’ ability to adopt and implement open banking tools to improve efficiency, customer service and scalability.

2. Process automation manages repetitive tasks

The mortgage industry can be process oriented, but many lenders are still unsure about the benefits of adopting new, automated ways of working.

A 2021 Zapier report on the state of business automation shows that nine out of ten knowledge workers think that automation has improved people’s lives in the workplace, and two thirds would recommend automation to other businesses.

Mortgage lending involves a vast number of repetitive tasks, with a huge number of documents, forms and compliance directives that need to be accurately handled, alongside intensive knowledge-based expertise from its employees. 

By embracing mortgage technology and digital transformation – which includes mobility, analytics and paperless processing – mortgage lenders can benefit from: 

  1. Time saving 
  2. Cost reduction
  3. Increased productivity 
  4. Minimizing errors
  5. Standardizing processes 
  6. Increased efficiency 
  7. Ensuring compliance 
  8. Effective document management 
  9. Increased visibility and transparency of auditable records 

Business process automation can hugely benefit the industry, reducing employees’ administrative workload and freeing them up to use their knowledge, skills and expertise to better serve customers. 

3. Big data and analytics boost customer insight

Big data is getting bigger – the World Economic Forum estimates that by 2025, 463 exabytes of data will be created each day globally – the equivalent of 212,765,957 DVDs per day.

Data and analytics are crucial tools for today’s financial market, and mortgage lenders who do not have a defined data and analytics strategy are missing out on opportunities to accelerate growth, control costs and mitigate risk.

By becoming more data-centric, mortgage lenders can scrutinize loan applicants to a much more sophisticated degree, enabling a deep dive into customer profiles to a granular level, through tools that don’t just look at databases, but at additional information such as tweets and news clippings that are available in the public domain. 

By mining data sources and then analysing the findings, lenders can better understand these customers, their financial behavior, and even the likelihood of them keeping up with repayments. This directly impacts the way mortgage lenders service their accounts and can also help with cross selling and checking for mortgage fraud. 

The more data a bank has, the more informed its decision making can be, and by analyzing emerging market trends and identifying ways to improve profitability through data analysis, lenders can be more proactive, efficient and faster off the mark.

4. Benefits of AI and ML-driven risk analysis

AI and ML are making possible huge changes within the mortgage industry. A Forbes survey revealed that 55 percent of executives think that AI will make their firm – and the mortgage lending industry overall – more competitive. And 59 percent say that AI’s impact on the industry is now a key focus in strategic decision making.

From chatbots, to forecasting, to credit assessment, ML can help lenders improve accuracy, lower costs and increase efficiency by automating manual tasks. If used for credit compliance, ML has to be specifically managed, but while it looks like a black box, unable to explain in human terms the reasons behind a decision, advanced, cutting-edge solutions are countering this drawback.

The more a mortgage lender knows about a borrower, the better they can assess their creditworthiness and likelihood of defaulting on a loan. Mortgage technology can help with risk analysis of loan applications and identify the best way to engage a customer profile, making decisions more accurately and efficiently, and streamlining the decision-making process.

5. APIs help create a seamless mortgage experience

The use of APIs is growing at a rapid rate across all industries, and in the financial services industry in particular. According to the annual RapidAPI Developer survey, conducted at the end of 2020, around 69 percent of respondents saw more usage of APIs in the financial services sector in 2020 than in 2019, with 77.3 percent expecting continued growth in 2021.

APIs are becoming a crucial tool for mortgage lenders who are keen to stay ahead of the competition. Not only can they use APIs to communicate directly with their customers, but they can also be made available to any businesses interested in developing an interface or connection to their product or service, quickly and efficiently bringing new and innovative products to the mortgage lending process. 

APIs differ in functionality and can be developed to query data, update a database, or provide additional functionality to a software application, for example.

Mortgage companies are now using them to leverage multiple solutions to achieve the functionality they need, and create a technological ecosystem that supports automatic communication between systems. They can also help mortgage lenders use different platforms to take advantage of functionality that best meets their needs. 

One of the biggest benefits of APIs is the workflow automation they provide, helping reduce errors, staff hours and costs, and providing borrowers with quicker updated access to statements and loan information. By choosing the right platform that enables integration of multiple systems or applications, mortgage lenders can provide the customer with a seamless experience through the entire mortgage journey.

How Sopra Banking Software can help

In a time of digital transformation, where mortgage lenders face a common challenge of lack of time and resources, enhancing efficiency through data collection and analysis, process automation and linked technology systems is key. 

At Sopra Banking Software, we understand the interdependence of these five technology trends, how they work, and how we can help your business use them to your advantage. By adopting the latest mortgage technology, banks can increase efficiency, reduce costs, improve customer satisfaction, and successfully navigate future industry changes.  
Watch this webinar with CEO of Kensington Mortgages, Mark Arnold, to find out how they leveraged our mortgage platform.

Click here to download our white paper on Open banking & mortgages: The next revolution in lending written by Chris White – Manager of product management at Sopra Banking – and Jan van VonnoDirector of research and thought leadership at Tink.

Aurélie Béreau Adélise

Strategic Operations France

Sopra Banking Software