The challenges ahead

by AB20 Nov 2018

Parth Pandya, CTO at Technobrain Solutions, predicts dramatic changes for the mortgage landscape

In the last few years the priorities for the major and tier-two banks have centred around building profitable customer-facing digital channels.

Increases in process improvement and investments related to smarter decision-making at the banks are expected to hit the market in the next 24 months.

There has also been a significant rise in the number of digital banks and nonbank lenders. We see fintech companies developing banking aspirations of their own, while on the flipside banks have shown the desire to become efficient, technology-led companies.

This means one thing: from now until December 2019 the landscape will evolve significantly for brokers, aggregators, banks and the technology developers themselves. I see multiple opportunities for those willing to take them, but there is also risk for incumbents that refuse to adapt.

Opportunities for broker aggregators

Aggregators have enjoyed a successful business model that has also paved the way for brokers to offer more than residential loans. However, dated and labour-intensive broker platforms will pose a real challenge in terms of justifying the ‘monthly fee plus commission’ model on each deal.

Having identified the need for efficiencies, some brokers have started their own internal systems by using technologies such as ID verification, secure document collection and marketing automation. But there is room for aggregators to provide a more unified, industry-specific, end-to-end solution.

The next generation of broker platforms will need to consistently employ CRM-based marketing, lead nurturing and data-driven insights for the broker to have more contextual conversations with the client and, as a result, greater conversions. I expect the market to see the launch of larger broker-centric software platforms with a more holistic solution set. These would work hand in hand with brokers as partners and not just as software or compliance providers.

It is highly likely that we may see a more aggressive and broker-centric aggregator win the lion’s share of the market in the foreseeable future.

Trading tech for market share

The broker channel continues to evolve, and this has been marked by the arrival of millennial brokers who typically come from a banking and technology background and are very comfortable with the concept of business on the go.

They are constantly looking for ways to boost efficiency. A business that is cheaper to run and one that is compliant with regulations is a profitable business, and they recognise that the answer lies in technology.

As the year rolls on, I expect to see brokers continuing to thrive through innovation in their business models and in the way they interact with customers using tech. From digital calendars to automated chatbots and offloading of data entry by the customer through customer-facing applications – all will change the way brokers traditionally run their businesses.

It is highly likely that we may see a more aggressive and broker-centric aggregator win the lion’s share of the market in the foreseeable future

The pressing need for brokers to redesign their businesses will give rise to new opportunities through the introduction of such things as technology training and support services.

Does this mean that brokers will be replaced by smart systems and artificial intelligence?

The technological enhancements in the field of AI are certainly impressive, but the tech itself has been around since the 1980s. Today, AI is cheaper, smarter and increasingly relevant to customers, but significant challenges remain, especially when integrating the human factor with business. It is easy to get carried away, but the really interesting stuff is still years away from coming to fruition.

For now, we must look at AI with a fresh perspective. Instead of replacing the broker, I believe it can complement the broker’s skills and work hand in hand. This could include an AI-generated priority list of customers to target and contact based on the needs segment they fall under, for example ‘ready for refinance’ or ‘ready for first home upgrade’.

More mainstream and successful implementation of AI is likely to develop in the area of fraud detection, and therefore the broker channel’s concerns about AI should be in the area of fraud and misleading or undisclosed information.

Niche market growth

Non-bank lenders and digital banks will grow their footprint by servicing specific areas. Their investments in technology will grow and serve niche segments across multiple lending scenarios.

In terms of trends impacting the broker channel, pure online and customer self-service lenders seem more likely to acquire tech-savvy customers at the expense of brokers. The space is certainly worth watching to see if brokers can present these non-bank lenders as real alternatives. Non-bank lenders specifically will thrive with the support of an extensive and experienced broker channel, effectively acting as a potent sales team.

Will these predictions prove to be accurate? Only time will tell, but the signs and data at hand are aligned.

Parth Pandya
CTO, Technobrain