"Digital application and servicing, Zoom advice, uploaded documentation and automated valuation models have never been so important."
Here are the top three benefits of digital lending:
1. Quick decision making
In a world where we’ve all had to adapt extremely quickly to working remotely, and I count us all in that bracket; lenders, brokers and customers - it has highlighted some of the advantages of the digital world and frailty of the analogue one.
Socially distanced lending? What happens to my mortgage timeline if I have to use the post? I don’t want to leave my house, sit in a branch or in front of a broker. I can’t or don’t want to let a valuer into my house. All of these issues have digital solutions. Digital application and servicing, Zoom advice, uploaded documentation and automated valuation models have never been so important. All of these are enablers for quick decisioning. Speed matters in different ways to different customers. We’ve seen a superb example of this in post lockdown with pent up demand driving the purchase market when combined with a time limited government initiative regarding stamp duty.
Competition with other potential buyers for the next dream house goes up, asking prices follow, speed becomes an enabler to avoid chains collapsing. Not to mention simply de-stressing customers as to whether or not they have passed the bar for a positive lending decision. That said, perhaps less important for remortgage customers, as long as a lender can complete before they fall onto a Standard Variable Rate (SVR). Ironically, we’ve seen examples of being too quick and receiving an apologetic call or two from a broker saying they have keyed the application too early, resulting in an offer being issued too quickly that will expire before the customers current deal ends.
2. Free up your time
The old adage of ‘time is money’ still holds true. It holds an intrinsic value for all of us and our brokers would like more time to do things that add value, whether this be spending more time with clients, business development or building out their own business networks.
Clients want time to focus on other things, not worrying about or chasing mortgage applications. Lenders would much prefer to be able to look at a case once with all of the information accurately provided in the most efficient way possible so they can increase capacity. Digital solutions can spin off time as a valuable byproduct - something we could all do with more of.
3. Paperless
The requirement for hard copy documentation in an environment where we can’t readily access it can be a point of delay for loan applications. Although this has been perhaps more keenly felt in the commercial lending market - ever tried to get Management Accounts or business forecasts from your accountant when they have staff on furlough?
It has also been a point of friction in residential lending for those trying to get hold of bank statements and payslips. The lenders that are happy to take digital copies of this information are on the right track, however given more time and stronger adoption surely Open Banking and Cloud accounting must be the ultimate solution here? Permission granted by the customer to access digital source data of bank account data in a consumable format is both an enabler of quick decisioning and expanded capacity for lenders.
There are clearly some barriers to this being the new ‘norm’ from a broker position but also where they fit into the timeline of direct from source information and consumer trust in handing over the keys to precious information. The reality is they need to provide this data anyway, but there’s something to be said for a customer having sight of this first in a tangible format, knowing exactly what’s being shared before allowing it to be done versus a tick box exercise with unknown or unreviewed source data hitting an underwriter or decision engine. This isn’t about customers having something to hide but everything about them feeling a level of control over exactly what is shared, and trust in how it’s used.
