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How Tech Helps Personalise Mortgages

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Micha Helbig, VP & Regional Head, Financial Services, Infosys

 

Mortgage providers rush to digitise

With interest rates remaining low and fewer houses on the market, mortgage providers need to find ways to win the attention of their customers. Competition is on the rise and those providers that don’t move fast enough risk being forced out.

Banks are feeling the heat, as Swedish lender Swedbank reported. It said it had been slow to respond to customer needs and was finding it difficult to defend its market share in mortgage lending.

Swedbank isn’t alone in this. When Infosys surveyed mortgage providers in 2021, nearly 97% of the 300 lenders who responded told us they wanted to pick up the pace of digital transformation, and fast. And that is happening: nearly a fifth were transforming four times faster during 2021 than the previous year.

This pace of change may be hard to sustain despite the urge to quickly transform. In the Netherlands, for example, a decade of low mortgage interest rates that saw rates fall to an average of 2.5% has ended. Rates have begun rising as inflation peaks in nearly 40 years. Housing prices (owner-occupied houses, excluding new constructions) rose 21.1% year-on-year in January 2022, the largest rise since 1995. This pushed the number of transactions down by 21% year-on-year in the final quarter of 2021. With a shortage of homes in the country, forecasts suggest that property sales will fall over 10% in 2022, pushing property prices further by 12.4% in 2022. Houses are becoming unaffordable for new home buyers.

Lenders need to boost their digital offerings to attract and retain customers, and investments in personalisation tools and digital platforms can help differentiate mortgage providers in a competitive market while keeping costs low.

 

Digital investments need to continue

Customers of this digital era expect the same level of ease, speed, and personalisation across all companies they interact with. While taking out a mortgage should be a highly personalised experience for customers, this is far from true: mortgages are still arguably the least digitised financial product, with limited digitisation and personalisation. After the accelerated pace of digital transformation in 2021, the sombre outlook for 2022 may mean less investment in personalisation and digitisation tools, despite the need for more, not less. And to be competitive, mortgage providers will have to develop more products and tools in order to be more attractive to customers.

 

Personalisation in mortgage is tough and complicated

Mortgages being a lengthy and complicated process is not new. But even if mortgage providers do go all-in on digital and simplify the process, borrowers still don’t want a completely digital experience: in this case, the personal touch needs to be human, not digital. Research from J.D. Power in the U.S. shows that customers still value in-person exchanges, especially for large life decisions such as purchasing a house. Customers don’t want to make such a decision on an app without any physical interaction. And this further complicates the mortgage customer journey.

Mortgage providers are perhaps reluctant to put in money when their topline isn’t expected to grow much, costs are rising and they aren’t yet sure which customer journeys they should focus on. They need to first better understand their customers’ demographics, their needs and preferences, and then design experiences that their customers find easy, simple and seamless, whichever the channel.

Mortgages involve a lot of regulatory paperwork. The Infosys survey in 2021 found that 10% of mortgage providers have a high usage of paper in their mortgage application process, while 34% have an equal mix of paper and digital. A few mortgage providers also require in-person verification for identification and other key aspects. This goes beyond the credit score. Until recently, identities could not be proven virtually.

 

How technology can help personalise mortgages

Different mortgage providers are going to want to personalise their offerings in different ways. But there are two ways that mortgage providers can tailor the experience for customers.

One way is to create or use a platform that enables different customer journeys that are 100% digital, 100% face-to-face, or a hybrid mix of both, using the same data underneath and all using the same system. APIs help to bring the internal and external participants in the ecosystem together, allowing for maximised digitisation and straight-through processing of customer journeys. This means customers can personalise their own journey, choosing which parts they want to experience digitally and physically.

Another way to personalise mortgages is to use big data. This helps make sense of customer information obtained from multiple sources to accelerate decision-making, provide a better price or a better set of services. AI and ML can help in making sense of the gathered data, equipping mortgage providers with deeper insights into their customers. This helps in personalising offers for each customer based on their repayment history, credit records, employment records, etc, but also to create early visibility of any risks, such as default. When interest rates rise, insights gained via big data can help with identifying customers that could potentially default on their loans and step in early to offer help before they run into payment problems. Historically there has been a lot of concern around bias creeping into decisioning. Lenders need to be mindful of not only avoiding discriminating unfairly against some customers, but also because of the risk of reputational damage. Adopting AI that is “explainable” can help.

Either way, digital investments in personalisation needs to be done because with the market slowing, mortgage providers must find ways to stand out among their competitors. Decisions made now are going to help mortgage providers succeed in the long term and add business value.

Banking

Resilient technology is the most important factor for successful online banking services

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By James McCarthy, Director of Solutions Engineering, NS1

 

More than 90 percent of people in the UK use online banking, according to Statista and of these, over a quarter have opened an account with a digital-only bank. It makes sense. Digital services, along with security, are critical features that consumers now expect from their banks as a way to support their busy on-the-go lifestyles.

The frequency of cash transactions is dropping as contactless and card payments rise and the key to this is convenience. It is faster and easier for customers to use digitally-enabled services than traditional over-the-counter facilities, cheques, and cash. The Covid pandemic, which encouraged people to abandon cash, only accelerated a trend that was already picking up speed in the UK.

But as bank branches close—4865 by April of 2022 and a further 226 scheduled to close by the end of the year, Which research found—banks are under pressure to ensure their online and mobile services are always available. Not only does this keep customers satisfied and loyal, but it is also vital for compliance and regulatory purposes.

James McCarthy

Unfortunately, their ability to keep services online is often compromised. In June and July of this year alone, major banks including Barclays, Halifax, Lloyds, TSB, Nationwide, Santander, Nationwide, and Monzo, at various times, locked customers out of their accounts due to outages, leaving them unable to access their mobile banking apps, transfer funds, or view their balances. According to The Mirror, Downdetector,  a website which tracks outages, showed over 1500 service failures were reported in one day as a result of problems at NatWest.

These incidents do not go unnoticed. Customers are quick to amplify their criticism on social media, drawing negative attention for the bank involved, and eroding not just consumer trust, but the trust of other stakeholders in the business. Trading banks leave themselves open to significant losses in transactions if their systems go down due to an outage, even for a few seconds.

There are a multitude of reasons for banking services to fail. The majority of internet-based banking outages occur because the bank’s own internal systems fail. This can be as a result of transferring customer data from legacy platforms which might involve switching off parts of the network. It can also be because they rely on cloud providers to deliver their services and the provider experiences an outage. The Bank of England has said that a quarter of major banks and a third of payment activity is hosted on the public cloud.

There are, however, steps that banks and other financial institutions can take to prevent outages and ensure as close to 100% uptime as possible for banking services.

Building resiliency strategies

If we assume that outages are inevitable, which all banks should, the best solution to managing risk is to embrace infrastructure resiliency strategies. One method is to adopt a multi-cloud and multi-CDN (content delivery platform) approach, which means utilising services from a variety of providers. This will ensure that if one fails, another one can be deployed, eliminating the single point-of-failure that renders systems and services out of action. If the financial institution uses a secondary provider—such as when international banking services are being provided across multiple locations—the agreement must include an assurance that the bank’s applications will operate if the primary provider goes down.

This process of building resiliency in layers, is further strengthened if banks have observability of application delivery performance, and it is beneficial for them to invest in tools that allow them to quickly transfer from one cloud service provider or CDN if it fails to perform against expectations.

Automating against human error

Banks that are further down the digital transformation route should consider the impact of human error on outage incidents and opt for network automation. This will enable systems to communicate seamlessly, giving banks operational agility and stability across the entire IT environment. They can start with a single network source of truth, which allows automation tools to gather all the data they need to optimise resource usage and puts banks in full control of their networks. In addition it will signal to regulators that the bank is taking its provisioning of infrastructure very seriously.

Dynamic steering 

Despite evidence to the contrary, downtime in banking should never be acceptable, and IT teams can make use of specialist tools that allow them to dynamically steer their online traffic more easily. It is not unusual for a DNS failure (domain name system) to be the root cause of an outage, given its importance in the tech stack, so putting in place a secondary DNS network, or multiple DNS systems with separate infrastructures will allow for rerouting of traffic. Teams will then have the power to establish steering policies and change capacity thresholds, so that an influx of activity, or a resource failure, will not affect the smooth-running of their online services. If they utilise monitoring and observability features, they will have the data they need to make decisions based on the real time experiences of end users and identify repeated issues that can be rectified.

Banks are some way into their transformation journeys, and building reputations based on the digital services that they offer. It is essential that they deploy resilient technology that allows them to scale and deliver, regardless of whether the cloud providers they use experience outages, or an internal human error is made, or the online demands of customers suddenly and simultaneously peak. Modern technology will not only speed up the services they provide, but it will also arm them with the resilience they need to compare favourably in the competition stakes.

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Finance

Why Financial Services must ‘Change its Change’ to deliver results

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By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp 

You can almost hear the collective sigh of relief from financial service providers following their business operations being pushed to the limits during the pandemic. But as the industry creates its new roadmap for the future, we must take care not to lose sight of the massive gains we realised, albeit inadvertently, as a result of COVID. While pain and challenge grabbed the headlines, this was also a time of unparalleled development – where financial service brands rapidly adopted a renewed sense of purpose and delivered urgent, game-changing business transformations.  

Since then, we’ve seen a slowdown in momentum – despite there being more pressure to optimise operational resilience, cost and service. In parallel, members of the public still rank financial services 15th out of 16 industries in terms of public trust, according to the 2022 Edelman Trust Barometer. That’s despite a slight increase of 3% from last year. 

It’s no secret that the financial services industry is grappling with a ‘perfect storm’ of political, environmental, social, technological, legal, and economic (PESTLE) challenges. All that, alongside managing pressure from shareholders to reduce the costs of service, improve revenue and delivery, and protect people and organizations from risks. 

But there is another, harder reality – it’s time for some brands to face a few home truths regarding their response. The global financial services sector makes up around 20-25% of the global economy – we have the people, brains, passion, and power to proactively steer and redesign the global industry around challenges. So, by definition, we must accept some level of responsibility for the business pains we are now facing.  

Creating great customer experiences, digitisation, responding to stricter regulation – these themes are nothing new. Over decades, scores of banks and insurers have responded to PESTLE challenges by implementing ambitious change programmes. And while there’s absolutely nothing wrong with aiming high, the problem comes when brands are unwilling to consider better ways of working than delivering big batch, inflexible, four-year plans. It can take months just to scope out the work, design a change, or run some trials. By the time brands implement these plans, everything has changed – they’ve got a new political situation, interest rates have gone up and they’re already behind the curve.  

That way of working isn’t right for customers either. A key way for financial service firms to build trust with customers is to solve their problems when things go wrong. But research shows that 25% of customers couldn’t get their problem solved completely on the first contact – be it poor customer journeys, poorly-designed apps/tech, or failing automation.  

These glitches could be viewed as being at odds with requirements of the FCA’s new Consumer Duty. It requires financial service companies to “deliver good outcomes for retail customers” and to compete “vigorously in the interests of customers, in line with its mission to better protect customers.

The financial services industry is working hard to deliver customer experiences – bringing in new products and services, available easily through apps, and supported with ever-increasing due diligence requirements. And so change itself is not a problem – it’s the methodology that is. We cannot solve this by either tinkering around the edges or preparing wholly unwieldy plans. We must ‘change the change’, stop ‘analysis paralysis’, and take a more agile view in order to be more responsive – especially amid the looming recession – when financial services are grappling for talent in an employees’ market. 

Retail and fintech: beacons for future innovation?  

It’s widely acknowledged that fintech is leading the way in enabling rapid change and delivering milestones at pace. In parallel, we take lessons learned from the ‘best in class’ innovation emerging from retail, which has optimised customer journeys to a different level. 

Take The Very Group for example – the company created a Customer Closeness Center (CCC) – an environment they can use to identify and test improvements to CX, customer journeys, and user experiences in a real customer environment, in real time. This involved gathering insights which inform key business changes and rolling out digital technologies such as chatbots. The Very Group also improved voice and email services on the front line, upgraded complaints management, and are delivering significant transformation of back office. 

This transformation led to a 33% year-on-year reduction in average contacts, reduced cost by over £5 million in contact reductions alone, and achieved a 73% First Contact Resolution rate. It also achieved a 35% score on Net Promoter, based on customers who made contact using the telephone, which is more than 20% better than the industry average. It was effort, not luck, that saw them win several CX and innovation awards – particularly the way in which the group implemented change; linked up technology, data, process, and people; and tested and continuously improved the solution daily and weekly.  

Changing the change brings happier customers, better employee engagement, and improved resilience and overall profitability. And there’s nothing stopping the rest of the financial services industry from becoming the next globally-leading industry for transforming operations and delivering integrated customer experience.  

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