In support of their presentation at the Digital Innovation Summit next week , Francesca Carlesi, CEO of Molo Finance gives their perspective on digital mortgages.

With fintech companies disrupting more and more of the established financial order, a question being increasingly debated is: are mortgages also on the verge of similar disruption? Is it even possible to digitise an industry as large and important as mortgages in the same way already being done for other products - such as consumer loans, cards and SME loans - and outside banking, with e-commerce, food and retail?

Then vs. now

Thanks to the advancement of technology, the traditional view that mortgages are too complex to digitise without cutting corners and that customers would not rely on an online experience for such an important choice in their life is now being challenged.

New players are emerging, and are testing new digitally-enabled business models based on speed, ease, transparency and lower cost. On average, they all benefit from substantially lower operational costs, better customer experience and much shorter decision times. In some countries - especially US and Australia - digital lending is becoming mainstream in the mortgage space since new innovative players entered the market just a couple of years ago.

Uncomfortable truths

How is this possible?

Whilst this might conflict with conventional wisdom in the industry when looking at the macro-trends currently facing the banking sector, some uncomfortable truths are emerging clearly across technology, regulation and customer preferences:

• The advances made on the regulatory side - like open banking - have opened massive opportunities for lenders to access customer data instantly and digitally, allowing an instant assessment of the borrower's creditworthiness without any lengthy paper-form, scans and manual calculations
• New tech-enabled utilities have flourished, providing fundamental services around KYC, AML and ID&V instantaneously, which are also backed by more robust systems than the human checks still existing in most banks
• Customers have shown that across all sorts of financial products, including mortgages in other countries, they are ready for a fully online buying experience as demonstrated by the impressive take up of similar products.

Customers and lenders changing needs

These shifts are allowing for new and innovative business models mirroring those of other industries. These include data-driven decision making, horizontal and vertical partnerships and reduced overall costs in systems which allow for increased customer access.

In this new world a new paradigm is emerging, almost unforeseeable in a traditional bricks and mortar space: customers will be able to access superior services at a lower cost, whilst lenders will be able to significantly trim down their cost base, provide a much better customer experience and also a more robust credit assessment - all at once. Those that embrace the new model will, in time, reap significant rewards.

The brave new world

Considering the importance of mortgages to our customers? lives and the current complex and often largely manual process, there is potential for substantial improvement. With housing affordability and access to the housing market itself being such a pressing issue, particularly for the younger generation, the potential for the right application of technology to the housing market can impact more than just the customer experience. It can also affect the health and welfare of the industry itself.