How is mortgage technology advancing?

Expert expects to see increased popularity of open banking in 2024

How is mortgage technology advancing?

Technology in the mortgage space has gone from strength to strength in recent years, following a surge in its implementation during the COVID-19 pandemic.

So, what have been some of the recent genuinely beneficial developments, what areas need further improvement, and what are the expectations in this space looking to 2024?

What tech developments have been beneficial?

In the mortgage space, Katie Pender (pictured), managing director of Target Group, has had hands-on experience with robotic process automation (RPA) and optical character recognition (OCR) technologies.

“RPA, like a robotic assistant, quickly identifies and gathers required documents for brokers, while OCR reads and verifies details such as dates and amounts on bank statements and payslips,” she said.

This combo, Pender added, allows brokers to receive almost instant decisions on documentation compliance, streamlining the process.

While implementing these technologies requires upfront investment and training, she said, the long-term operational efficiencies and the ability to maintain a human touch make it a worthwhile evolution in the mortgage industry.

“There is room for growth, and I have seen successful results, but widespread adoption is still in progress,” Pender said.

How can tech in the mortgage space expand?

In the mortgage market, Pender said Target Group has utilised RPA in various ways; setting up robots involves programming them to mimic human activities, streamlining tasks.

“For instance, in our initial deployment with a packaging team, the robot learned the keystrokes and decision-making process of underwriters or packagers, generating a shopping list for brokers instantly,” she said.

Dual running with human validation helped refine the process, Pender said, after which Target Group incorporated OCR technology to analyse and categorise information, such as validating income and expenditures.

While it requires investment and time to cover all scenarios, Pender said, the result significantly reduced the workload for the packaging team, expediting the application process for brokers.

“The efficiency gains allowed us to remove or reduce team members, creating operational efficiencies while providing faster decisions for brokers,” she added.

What tech developments need improvement?

The mortgage industry, Pender said, initially buzzed with excitement over the prospects of big data and data analytics.

“The potential for deep insights into customer behaviour beyond income and expenditure was particularly enticing,” she said.

While lenders traditionally use profiled data for decisions, often relying on Office of National Statistics data, she said, their reliability and accuracy are often challenging.

Big data and analytics, Pender added, promise a granular understanding of customer behaviour, aiding in more accurate decision-making and risk reduction.

“However, the industry has not fully embraced these possibilities, and several factors contribute to this hesitation,” she said.

Consumer concerns, Pender said, stemming from events like the Facebook scandal, have heightened fears about data misuse.

Despite GDPR’s intention to instil confidence, she said, it seems to have had the opposite effect, with varying interpretations among organisations leading to a lack of consumer trust.

“Ethical and responsible use of anonymised data could significantly refine decision-making processes, but organisational apprehensions persist,” Pender said.

In essence, Pender said the industry started with high hopes for leveraging data analytics, but faced hurdles due to consumer apprehensions and organisational concerns around GDPR interpretations.

What further developments in mortgage tech are needed?

Pender believes blockchain holds immense potential in revolutionising the mortgage application process.

“The Land Registry initiated a project seven years ago exploring how blockchain could securely exchange information between organisations, particularly in areas like title searches and registration,” she said.

While it might not completely replace the legal elements of conveyancing, Pender said, it has the potential to streamline and significantly reduce the need for certain processes in collaboration with the Land Registry and lenders.

The conveyancing part of the mortgage process, often the lengthiest, she said, seems resistant to technological advancements.

“Solicitors, in particular, have been hesitant to embrace change, expressing a preference for traditional methods like faxes and paper; despite efforts to show how technology could simplify their workflow, there is notable resistance,” Pender said.

The repetitive nature of document requests throughout the mortgage process, where customers are asked for the same information multiple times, she added, is a source of frustration.

Implementing a blockchain-based solution, Pender believes, could lead to a more efficient and customer-friendly process.

This technology, she added, could streamline document verification, making it more reliable and less susceptible to fraud.

“However, despite its potential, blockchain remains underutilised in the industry, and further investment and utilisation are needed to fully realise its benefits,” Pender said.

Expectations for the development of mortgage tech in 2024?

The mortgage industry, Pender said, seems a bit behind in embracing open banking fully, with control appearing to be a key factor influencing the adoption rate.

While open banking provides valuable insights into customers’ income and expenditure, she added, there is hesitation, especially in the conveyancing process, where solicitors are resistant to technology advancements.

“During the development of Mortgage Hub, we encountered broker reluctance to relinquish control over information visible to lenders,” she said.

Brokers, Pender said, are cautious about potential impacts on their advice, including the practice of ‘window dressing,’ where applicants adjust their behaviour based on broker advice to present a more favourable financial picture.

This reluctance, she added, contributes to the industry’s slower adoption of open banking, even though it could significantly reduce processing time and lead to instant mortgage decisions.

“Efforts are being made to change this narrative, with some broker firms gradually embracing open banking,” Pender said.

The goal, she said, is to streamline the mortgage application process, catering to the impatience of the younger generation, who demand quicker decisions akin to their experiences with instant payment services.

“Similarly, there is a resistance to giving up control over communication with applicants; brokers want to own the relationship and control the messages, creating a challenge in providing constant updates to applicants throughout the mortgage application stages,” Pender said.

While brokers see it as part of their service, she said, there is a growing recognition that the mortgage process is not just transactional but also an emotional experience for buyers.

“Despite these challenges, there is hope that the industry will eventually become more comfortable with adopting open banking and providing real-time updates, ultimately improving the overall customer experience,” Pender said.

How have you seen mortgage technology advance in recent years? Let us know in the comment section below.