On the way to the digitalization of mortgages
The banking sector has been undergoing transformation for some years now. With digital innovations, this transformation is accelerating, creating competition in unexpected places with surprising new players like Orange and Google. It’s a race to make the client journey smoother and simpler without dehumanizing relations. An increasing number of banking products are available through online subscriptions, while every year, the number of visits to banks decreases by 15%. These trends are impacting mortgages in particular, as explained here.
Did you know that 80% of French people use the web to find a place to live, 48% are willing to take out a mortgage online, and 41% would be happy to forego any physical contact for their real-estate projects?
What are the challenges for banks?
The focus needs to be firmly on clients, which requires banks to make improvements in three areas:
A smooth client experience. The main challenge is to fully digitize the client journey, particularly for insurance, which means delivering on the promise of digitization and designing a seamless process. For example, banks need to find an insurance partner that can also offer a digital client journey (online health questionnaire, electronic exchange of documents, paperless contracts, online doctor appointments with an integrated partner, etc.)
An excellent client experience. Signing for a mortgage is a major life event that carries strong emotional significance for the client. For a successful digital transition, it is essential to build a relationship with the client, ensuring that the less frequent face-to-face contacts add more value than in a traditional framework. Since clients are not mortgage experts, it is important to provide friendly, one-on-one support. Making them the focus means concentrating on the quality of service, offering a consistent experience at every contact with the bank, with any online counselor. This is all the more important when increasing numbers of clients are prepared to pay more for their mortgage (higher rates, administration fees, guarantees, insurance, etc.) if they perceive the quality of service to be high. The client experience is not poorer but different, and even improved.
An agile client experience. This implies changes to the organization. Client needs are evolving very fast and their expectations are quickly obsolete, which means banks must be able to (re)act quickly. They need to be organized with this in mind. More and more are adopting a DevOps approach, which means unifying development and operational teams to facilitate collaboration and speed up developments, such as the end of V-cycles, or agile models. The next step could be BusDevOps, adding product (business) teams to the mix. This would also mean a value-chain organization, putting all the key departments in the same space. In a way, these act as mini companies within a company.
The client’s involvement in the development of banking solutions is another important aspect. Did you know that most decisions taken at ING are based on client feedback from different channels (complaints, satisfaction surveys, Web Café, etc.)? Clients are also involved in AB testing when online forms are updated: 50% of clients have access to one version (Form A) and 50% another (Form B). The teams then observe client behavior and see which version of the form produces the highest conversion rate.
Is regulation still a barrier?
French regulation used to be particularly limiting for fully digital client journeys. The Scrivener 2 Law, aimed chiefly at preventing excessive personal debt, imposed a cooling-off period of at least 10 days after sending a consumer a mortgage offer in the post.
The Scrivener cooling-off period is still in force but no longer requires proof of postage. Without this operational constraint, the way is now open for users to sign digitally.
However, this legal requirement still exists in people’s minds. Most clients are more comfortable with the idea of signing a mortgage on paper, given the size of the commitment involved. For banks, a 100% digital strategy would mean losing market share, due to this lack of consumer readiness.
To conclude…
The almost contradictory challenge for banks is to provide a standard client journey while personalizing the client experience. This means offering a clear and simple range of solutions, while providing the right support in the right place at the right time.
Regulation may have slowed digitization but doors are now opening to accelerated transformation. The main obstacle is no longer regulation but the need to change mindsets…
First published in Point Banque