So you’ve saved up for a deposit, and you and your special someone have found your dream home. But where do you go for your mortgage?
In recent years, consumers have had increased choice between large established banks, and new, agile Fintechs. So how do they compare?
Established banks have recently been experiencing mounting competition for business from a growing range of Fintechs and challenger financial service providers. These new, agile competitors have been emerging onto the financial stage and competing for business on various services traditional banks offer, using innovation, technology and personalisation to make their offering appealing to customers, who want increasingly quick and personalised service. But traditional banks are now responding to the challenge posed by Fintechs, by updating their own technology, to match Fintechs for speed and beat them on customer service.
One of Fintechs’ advantages has been the speed with which mortgages and other loans are applied for and approved. Their agile, cloud-based technology means approvals could be put through swiftly and automatically. More established banks used to rely on outdated legacy systems that were often several decades old. This meant that approval processes had to go through a complicated procedure, relying on human checking and exposed to human error. Customers would often have to wait for weeks to be approved for a loan. This could be far too long for some potential buyers, in a competitive housing market where property disappears fast.
But traditional banks are now responding to the challenge posed by Fintechs, by updating their own technology. Larger banks have adjusted to the speed of Fintech lenders with automation and AI tools. By using automated services to streamline the approvals process, one leading UK bank was able to reduce its mortgage application cycle from 11 days to 48 hours.
Whilst Fintechs have threatened established banks on speed, traditional lenders certainly still have consumer trust on their side. According to research from Blumberg Capital, only 4 per cent of borrowers have used a peer-to-peer lender, and 43 per cent of people in the UK who have used a Fintech are worried they may get defrauded. On the other hand, one in three people use apps from traditional banks. The reason for this might be the way banks offer more contact with real people.
Personalisation vs customer service
Perhaps the most dramatic change to banking in recent years is way we interact with our financial providers. The rise of banking apps from both traditional banks and Fintechs has led to increased personalisation. Many Fintechs have found success using data to find the best way to suit their customers. By using automation, larger banks will be able to offer something even more personal: in-person customer service.
Automating services doesn’t just put traditional banks on a competitive field with digital challengers in terms of technical agility, but it will also free up banking staff to focus on customer service, with more people available to talk to customers on a human level.
The point of contact with our banks is changing too. Many banks have seen the rise in digital challengers as a sign that in-branch banking is over, and the response has been to close branches, with a record number of 762 closures this year in the UK. But rather than taking away customer service positions, to balance out bank closures many banks are shifting their personnel and expertise into contact centres, so customers don’t have to go to the branch to talk to a consultant. As automation takes over the simple tasks call-centre workers used to carry out, these centres are now increasingly being staffed by experienced managers and loan officers, who can handle complex issues, including loan approval, over the phone.
Uber for banks?
And banking staff may not only be remote. In my last piece for HuffPost, I talked about the uber-like programmes that can be used by nurses in hospitals, so that the nearest staff in the area can be sent to people in need of assistance. This kind of tool can actually be applied to many industries, including banking. Using this, customers could find mortgage brokers nearby and organise meetings in a short time-frame, rather than having to arrange appointments weeks in advance. If it suits you, financial advisors could even be sent to your home.
The future of banking and mortgages is changing rapidly, as established lenders begin to meet with the challenge posed by Fintechs. The future for successful banks lies in automating the simpler processes, leaving staff to focus on the customer. In the future, we are likely to see services from traditional banks really speed up the time it takes to approve mortgages, loans and other financial services, making the process of buying your dream home that little bit easier.