Established mortgage lenders must embrace new technology if they are to maintain market share, according to a business process outsourcing firm.
Intelenet Global Services’ chief executive Bhupender Singh said one client - “one of the UK’s leading mortgage providers” - was among those neededing to improve its productivity to keep up.
“Although they are a household name with over 2,000 high street branches, customers are increasingly attracted by the speedy process times of the more technologically adept fintech players,” he stated.
“For traditional banks, the necessity to make careful decisions around risk has often reduced their ability to innovate.”
At the end of July, the Council of Mortgage Lenders revealed challenger banks and specialist lenders increased their gross lending by 56 per cent last year, translating to a 2.9 per cent growth in their collective market share.
By contrast, established retail banks and building societies increased their gross lending by a more modest 4 per cent and 9 per cent respectively.
The top 10 table of CML members remained the same, with the biggest moves coming from the challenger banks and specialists. Of 16 lenders in this category, 11 went up the table, including Metro Bank, whose 200 per cent growth in lending last year saw the most rapid ascent up the table, from 24th to 16th.
At the same time Lloyds Banking Group announced plans to cut 3,000 jobs and 200 branches, despite pre-tax profits doubling to £2.5bn for the half year.
The UK’s top six mortgage providers have seen market share decline from 86 per cent in 2009 to just under 69 per cent today.
“In the current housing market speed is everything: properties are snapped up incredibly quickly,” stated Mr Singh.
He added that applying Intelenet’s workflow system can reduce the mortgage offer cycle from periods of 11 days to just 48 hours. “Automation tools have truly moved the goal posts in this sector.”
Speeding up manual processes frees up employees from mundane admin, allowing them to put their focus on delivering a great customer experience Ishaan MalhiIn February, the Northview Group launched a mass-market lender New Street Mortgages, aimed at analytics-driven mortgages, supported by automated online applications and decisions.
Northview’s vice chairman Keith Street said it’s not surprising challenger banks are eating up market share.
“In today’s fast-paced property race, consumers are finding themselves up against a growing number of buyers and the result is they are now looking to secure mortgages as quickly as possible in order to get one step ahead of the competition.
“Lenders which have not yet adapted to the new status quo set by these challengers are now beginning to find their market share challenged.”
In April, digital mortgage broker Habito launched with the promise of finding borrowers the best mortgage for them within around half an hour, while Accord claimed to have reduced the time it takes a broker to receive an agreement in principle to an average of under an hour, down by three hours since May.
HSBC responded by launching the ‘Mortgage in a Day’, a new approval service to help house hunters get their mortgages signed off in just 24 hours.
Meanwhile, challenger Atom Bank aimed at the mainstream market with a broader proposition, all the while keeping costs down by dispensing with a branch network.
In May, government proposals for mortgage switching within seven days were included within the Queen’s Speech, meeting with pushback from lenders and their associations.
The Competition and Markets Authority outlined measures to ensure customers benefit from technological advances and challengers are able to compete more fairly.
Ishaan Malhi, co-founder of online mortgage adviser Trussle, said services like Uber, AirBnB and Netflix mean today’s consumers are used to getting what they want, when they want it.
“Automation should help lenders scale their expertise to meet both of these expectations without compromise,” he stated, adding: “Ultimately, speeding up internal manual processes frees up employees from mundane admin, allowing them to put their focus on delivering a great customer experience.”
peter.walker@ft.com
