There is one clear reason behind why pretty much all the innovation in online services is taking place in the intermediary market. The vast majority of UK mortgages – 80 per cent in HBOS' case – are written by independent mortgage brokers. The key to success is to know the intermediary better than anyone else. To understand what keeps them awake at night and to give them a smart, practical and efficient service.
Therefore it makes perfect sense for lenders to develop their IT strategies and services around the needs of their most important market. This entails investing heavily in research and development to understand what a broker service will look like over the course of the next 10-15 years. The next major leap forward will be the step-change from providing an online service to offering a real-time, interactive portal to a range of broker services. Some lenders are almost there, but unfortunately, the majority are the IT equivalent of 20 years behind the pace.
Online communities
In the business-to-consumer market a so-called brochure website is common. They provide details of goods, services and account information but they are invariably 'one-dimensional' and flat. Broker websites have the potential to be so much more than a simple shop window. They can become online communities where brokers can communicate and access a range of information and support connected to writing mortgages. A community is defined as: ‘a body of people having common rights or interests’. But the best way of explaining what I mean is to take a look at another industry. Business-to-business online services were initially championed by the car industry. Car manufacturers began communicating with their suppliers using a system called 'EDI' (Electronic Data Interchange). It was basically a pre-cursor to email and the internet. They found that EDI doubled efficiency in many cases.
However, because they were dealing with the same strategic distribution (replace with mortgage brokers), manufacturers such as Ford (replace with a lender, such as HBOS) realised that there was the potential to create an online community. It discovered its suppliers had common needs and interests, but also wanted the sense that the information available was tailored to their specific needs. In the case of car manufacturing, it consisted of a number of areas including auctions and trading, online broadcasts, access to real-time product information, chat rooms for dealers and real-time question and answer facilities. Combined with the bread and butter sales and product information, it has proved to be a powerful tool to deepen relationships with its key stakeholders.
The above example has clear comparisons with the mortgage intermediary market. Currently brokers can receive a cast-iron decision via the web, submit an application and then track its progress, stage-by-stage, online. The case-tracking element is the most popular and it emphasises just how interactive the mortgage process really is – or should I say how interactive it 'can be'. This all happens within a secure, password-protected environment.
Technology development
However, the growth of broadband means that now brokers can download different types of information. Previously data was being squeezed down the equivalent of pipe cleaners, which were designed for telephone data. The pipes being laid down now are the IT equivalent of the Channel Tunnel, meaning that voice, moving images, etc, can be downloaded in seconds. This means that brokers can also view online broadcasts by product and sales staff. As well as receiving product information directly to their desktops.
With the advent of pod casts and interactive TV, brokers will be able to have their own secure connection to underwriters and mortgage processors alike. By accessing a secure site they will be able to talk face-to-face with an underwriter or, potentially, be able to record a face-to-face factfind with a client. These facilities will be available 24 hours, 365 days a year. Imagine being able to download a taped interview you conducted with a client or underwriter 10 years ago. The possibilities are endless and these developments will go some way to easing regulatory and record-keeping worries.
Personal contact
These online communities will facilitate the feeling of belonging and will encourage personal contact. The common misconception is that further developments of this nature will result in a Little Britain-esqe ‘computer says no’ way of working. However, relationships will always stand up against technology. All the research conducted amongst the broker community says that they value their Business Development Manager (BDM) almost as much as the technology. They see the BDM as the face of the lender, playing a key role in ensuring that the lender to broker relationship stays on-track. Therefore, major lenders are simply working on how to enhance the relationship and make it an even more personalised experience.
For example, a secure online portal will instantly recognise the broker accessing the site. It will then reconfigure itself to offer products and exclusives tailored to that specific broker. Already brokers can receive their intermediary news online. But in the future, expect major lenders to secure deals with trade magazines to provide online broadcasts and pod casts direct to their online communities. Brokers will then download the files from the lenders website. Brokers will be able to access them via a wireless handheld device, such as a Blackberry. Pod casts – broadcast files that can be downloaded onto an iPOD – already have cult status. 250,000 people downloaded Ricky Gervais’ regular comedy show and Radio 1 has had great success in the United States with its music shows. This success will move from the consumer markets into the B2B sector over the course of the next few years.
Driving consolidation
These developments will bring the intermediary market closer together and may also drive consolidation. There will be those lenders who have the in-house resources to re-engineer their businesses as an online community and smaller lenders offering a niche, specialised service. There will be little room for mid-size lenders offering a vanilla mortgage range with a standard telephone-based and postal application service. Currently, many mid-sized lenders are rushing out IT systems. But what they fail to recognise is that being a true online business means completely re-engineering your back-end processes and systems. An online service is only 100 per cent effective if it is end-to-end. There are still some lenders who are championing themselves as being an online player, but still require brokers to print off reams of paper at different stages of the mortgage application process.
Online communities will allow brokers and lenders to engage in timely and fluent conversation. The best way of doing this is often via online broker forums. Brokers can outline their views and add and share comments. It can often be uncomfortable for a lender, or any organisation, for that matter to have potentially negative comments on their own website. But open and honest communication has proved to be a major plus point in the intermediary market. A lender that can hold its hands up when service is not going well, as quickly as shouting about its successes, can score plus points in the eyes of the broker. Broker forums are superb ways for lenders to improve their systems. A community is constantly changing shape and behavior.
Forums reflect these changes and allow lenders to quickly pick up on changes that need to be made to their systems. Not only what has to be done, but the priority issues that brokers most care about.
Online communities will also translate into achieving a lender's retention objectives. Retention only works by working with, and supporting, the broker. Therefore an online community can support a broker to achieve a better, lifelong relationship with the end-consumer. This relationship should take the form of a triangle with the lender – the online community should be the hub of that. There should be an element of an online service from a lender that is white-labeled by a broker. This can help the broker to retain and develop their client, making the most of cross-selling opportunities where possible.
Despite what you may read in the newspapers, mortgages are not completely commoditised. Borrowers still want to secure a mortgage with a lender that they can trust and someone that they have actually heard of. Online communities will help to de-commoditise the mortgage market and help to embed brands in the minds of brokers and consumers alike. The modern customer wants instant everything. They are not willing to make allowances for their mortgage because of the seriousness of the transaction because they know the technology exists to make it happen. Lenders have been slow to get out of the IT blocks, but they should now have a clear direction. To offer brokers a true online community, which brings themselves and independent mortgage brokers closer together than ever.
Tim Hague is director at BM Solutions
