"At launch we will focus on providing buy-to-let mortgages through a fully digital instant proposition. "
We spoke to Francesca Carlesi, CEO of Molo, about the firm's launch plans, what Molo will offer, and how ‘digital mortgages’ will continue to evolve.
FR: Molo is gearing up for launch – can you give us an overview of the products and services you will offer and what your aims and focuses will be?
Absolutely! this is a very exciting moment for us as you might imagine.
At launch we will focus on providing buy-to-let mortgages through a fully digital instant proposition. This is something revolutionary in the market, currently not available in the UK and in Europe.
In short what this means is that we will offer customers the ability to secure home financing online, digitally, in a few minutes without having to fill in cumbersome paper-based applications, scheduling appointments or calls that usually take weeks to happen.
Whilst we are focusing our offer on buy-to-let landlords in the beginning, we will soon be developing our proposition and expanding the offering to the residential owner-occupied space, i.e. the majority of people that typically buy a house to live in.
The focus of everything we build at Molo is to make the home buying experience much simpler, quicker and less expensive than what is currently available in the market. This will allow our customers to secure their chosen property very quickly whilst also saving on unnecessary costs.
FR: What will make Molo different from other competitors in the market?
Almost everything will be different between Molo and current competitors, as we believe the current market practice has lagged significantly behind in the last few years. This happened at the detriment of customers, who have ”settled for too little for far too long” (as one of our key advisors Lynda Blackwell recently noted). In particular, three aspects will be the main source of differentiation:
- Speed: the current mortgage process is incredibly slow, uncertain and cumbersome. We intend to provide an instant mortgage offer, reducing uncertainty for our customers and ensuring they can secure financing for their home quickly and without delays.
- Ease/convenience: the current process is paper-based and often very painful compared to any other experience in financial services today. We want to change this and make sure everybody can get a mortgage without the need for scheduling appointments and taking time off work to get there.
- Fair: we care about our customers and believe in doing the right thing for them always, no matter what. To achieve this we have built a process and a set of products that aim at ensuring maximum transparency and fairness at all times. We believe in fair products, fair prices and fair services at all times.
FR: What was your background before co-founding Molo and why did you decide to set up the firm?
Well, I have spent many years in the traditional banking industry before founding Molo, so in a way I am one of those that converted to the new economy after a long career at the heart of mainstream financial services. Having started my career at McKinsey I then spent few years in private equity before joining Barclays and subsequently Deutsche Bank here in London.
Molo was born exactly out of the frustration with the current banking sector, especially post crisis, and the realisation that the banking model post crisis is fundamentally broken: the mix of regulation, technology and consumer preferences has radically changed the economics of the financial industry as well as the interaction model.
Only those banks that are able to reinvent themselves will thrive in the future, but this is so difficult to do as an incumbent institution: incentives are not aligned, legacy systems get in the way, layered organizational structures paralyse decision making. Hence, the need to start from a clean slate, looking at things with a fresh perspective and building for the future rather than trying to fix the past.
This can only be achieved by setting up a new company from scratch, by bringing together like-minded visionary people, setting up the right culture from the start, aligning on the same mission and delivering on this with passion and energy.
FR: How will ‘digital mortgages’ continue to evolve, and do you see them becoming a help or a hindrance to intermediaries?
Digital mortgages are not something particularly special or different, but simply an optimised way for people to get their home loan. Consider what has happened in the retail sector: online shopping and optimised delivery methods were once rare but are now the norm. People have become accustomed to and expect a certain level of service from most of their providers. The same is happening in financial services and mortgages is simply the next frontier for digitization. I have no doubt that our children will buy mortgages online similarly to what already happens today with insurance, wealth management and retail products! This is simply gravity and we want to be there to shape this market for the benefit of customers.
In this world, intermediaries will of course always play a role, although a more specialist role focused on more complex or sophisticated cases (simpler, mainstream cases will instead be managed online). Whether this is a help or hinderance to intermediaries will have a lot to do with how they choose to adapt. The optimisation of the application process and the transparency of decision making can actually make their work easier. From our side, we welcome intermediaries who are willing to challenge the status quo and we want to work with them to build a better experience for customers.
FR: What new products or criteria would you like to see become mainstream in the market?
The mortgage market is undergoing profound changes on the distribution side, but only limited shifts on the product offering or criteria so far. This is quite surprising given that the product offering, lending criteria and overall underwriting approach is quite obsolete in this country compared to what is happening in other products (e.g. consumer loans or insurance). The limiting factor to innovation so far has mostly been regulation and the high cost of human processing, but once technology will be adopted more heavily I would expect the industry to catch up. Key things I would like to see (and I expect to see) becoming mainstream include:
- Risk-based pricing of products: this will allow lenders to provide bespoke pricing for each individual based on the specific risk profile, rather than using the current “cookie-cutter” approach where pricing is mostly driven by LTVs and product type. Allowing for risk-based pricing would vastly improve customers outcomes, providing access (at the right price!) to mortgages to a large group of people who are currently discriminated out of it based on eligibility criteria, or are forced to overpay compared to their true risk profile.
- Longer term fixed-rate products: this is already the norm in most European countries, but non-existent in UK. The benefits for customers again would be huge, in terms of affordability assessment, access to the market and reduction of overpayment on SVR.
- No fee products: although not very visible, fees on mortgages today can be a significant burden and unpleasant surprise for customers, also due to the fact that they are often poorly communicated and not transparent. Most of the fees have no reason to exist, but they are just convenient as extra profits for banks and lenders. Fair products should have limited/no fees ensuring the customers truly pay what is fair for a specific product and risk profile.
FR: If you could see one headline about the mortgage market in 2018, what would it be?
'Digital mortgages pave the way for fairer access to home financing'.