BONUS EPISODE: iSelect and the future of mortgage broking

• The value online services bring to the broking industry
• How brokers can harness the power of technology to optimise the customer experience
• What iSelect has in store for the future

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Full transcript

James: Hi, it's James Mitchell of The Adviser. How are you doing?

Scott: Hey, James. How are you?

James: Yeah. Very good. Thanks. iSelect have made it into the Top 25 Brokerages this year.

Scott: Yes. Very happy with that.

James: It's obviously the first time you've been included in the ranking and you've come in at number 13 here just behind N1 Loans and I understand you’ve got 25 brokers working for the organisation. Is that correct?

Scott: In the total team we've got 37 on our home loan team but there's 20 brokers on the front lines with our customers.

James: It's an interesting time at the moment in mortgage broking with online players such as yourself entering the space and really ramping things up. And I guess for a lot of the more traditional mortgage brokers out there it might be a bit contentious, you know what I mean? That an online sort of channel is included in the Top 25 Brokerages. I was wondering if you could maybe give us a bit of background in terms of what iSelect is, how it is a brokerage, and also the work you do with AFG?

Scott: We've been going now in mortgages since 2012, we started. If you go all the way back to 2012, we used to have mortgage brokers running around in cars the same as a lot of the banks, or a traditional mortgage broker. What iSelect has done over many years, and I guess we're looking at this in lots of different parts of customers lives, is everything is moving online. If you, digitalisation ... Digital disruption is the trend word, but if you think about whether you're opening a bank account, share trading account, anything you want to do, we start in an online world. That's just the way we're doing it.

And really, what we set out a good couple of years ago now to do, was to say look, the mortgage application process, and that whole process from the time of the customer coming in and saying, "Well I'm thinking about buying a new home or refinancing.", all the way through to that settlement, it was the same process and a lot of the items had been the same for probably over 100 years.

I still had to ask them to witness signatures and going to get a justice of the peace to verify pay slips etc. Yet, in many other industries there were digital solutions that gave the same outcome, and often a more secure or better outcome.

So we started probably about three years ago saying, how could we digitise that whole process of mortgages, so that we don't compromise on advice to the customer? In fact, ideally, we'd give better advice, more time, less complexity. Because we often see people aren't interested in the mortgage, they want the home. So our objective as mortgage brokers is how do we get people into their homes? With the right advice, finding the right loan, ultimately, to help them get that experience as effortless as possible. For us, the best way to think about iSelect is we have 20 brokers. They happen to be on the phone.

If you rang a bank, or you rang your own mortgage broker on their mobile phone, or their landline, we're just using a series of technologies in the back to strip out all ... What you might call, the non-value added steps. So where you think you might traditionally post out a pack or go and visit the client, sit down and get to know them in the first hour. Understand their needs and then go away and do that comparison. What loan meets that customer's requirements, and come back again.

In our model, what we do is use the website and a series of technologies in the background, to effectively do that in real time. We're doing things like using MOGOcheck to bring you your banking statements, instead of having you sit down and get your pay slips verified, and things like ZipID. Again, instead of forcing you as a customer to go and get your ID certified, photocopied, et cetera, we'll come to your place of work or your home, and get that done.

James: Yeah.

Scott: And so it's being able to ... Working with some of our key lending partners to say look, it was often changing banking policy, not legislation. So it's saying DocuSign is a perfectly acceptable form of consent or verbal consent, but its certain components that we still need to be aligned, just the same stuff as any other broker and legislator would do that. The difference is we 100 per cent call record. We track, as in, digitally. We're using technology to give us a very secure ... And you know every conversation is recorded, there's no room for having a conversation that a customer doesn't understand because we're literally stepping through that process with the customer, making sure everything is secure.

For us, we're trying to really digitally enable the brokers so that they get ... If you think it's all the stuff that normal brokers, the paperwork they hate doing but have to, we're trying to automate that. And streamline it so that the customer experience is streamlined. The broker can give more time with the customer and better advice, but ultimately instead of the down time of waiting for packs to come back or chasing the customer, or trying to get in contact with them, we're doing that in a much more streamlined way.

James: It seems that over the last couple of years at least, there has been this movement where there has been an emergence of players, whether it's groups such as yourself, iSelect. You've got groups like Lendi for example. Uno I guess to a lesser degree. Their strengths are in fulfilment, and digital channels, and customer acquisition. Then, they're realising the advantages in the mortgage broking space and then, bringing in the technical expertise in terms of the broking side afterwards. But they've got that marketing area down pat. Whereas, the traditional model has been ex-bankers become mortgage brokers or people are mortgage brokers in the industry. They've got the technical expertise. They understand lending. But, they're not necessarily great salesmen and they're trying to develop their marketing expertise.

Do you think there's going to be more people from outside the broking industry in terms of the technology space, the digital space groups like iSelect, coming in and realising the opportunity there?

Scott: The short answer is absolutely. Because any industry, and it doesn't matter whether it's mortgage broking or the tax industry with Uber. It doesn't matter what part of our lives these days, technology is enabling it. The consumer has more information than they've ever had. Therefore, whether it's large corporations or individual operators, we all need to realise that the customer ultimately controls the conversation. They've got the power in this.

If you look at what we're trying to solve, it's removing those ... Realising the traditional mortgage application process is ... There's a whole heap of pain points, and a whole heap of heavy lifting that the customer has to do. Be that because the lender is asking them to do that and that's the way we've always done it. Or, it's just that nobody has actually brought the technology to bear. What we believe is the customers ... Given it's such an important and expensive show, this, we generate over 200,000 customer leads a year for people claiming specifically on mortgages.

Now that's an enormous amount of lead inquiry and the envy of lots of other people. So that creation of that marketing demand, where we're noticing that we were struggling to get through to ultimately settlement, was the amount of pain points in that traditional process. For us, we started a couple of years ago saying, "Look, how do we get to a digitised home loan process?" That we take that technology like you were touching on, and streamline the application process. So things like the ZipID, the DocuSign proviso, but give the same outcomes. We've got all the banking statements in seconds, and we remove those steps of having to send paperwork and a wet signature, and wait for the customer to post it back to us.

By being able to do that, and a great example is the compliance documents that we had with AFG ... We aggregate under AFG. Ninety-five per cent of those are now signed digitally. Three of our lenders, we have that form. We can have you conditionally approved in three hours. We've now got one lender where we've pioneered that. And you know, it depends on the customers segment and that we've got the right buy value ratio et cetera. From formal lodgement, we can have them formally approved in twelve hours, but it's using those digital processes.

Now there's still ... Take NAB bank for example. You can go through the conditional approval, the formal settlement and there's probably still five documents you have to at the end, print out, sign etc. that the government still require. But we've gone from probably 100 pages of documents that were all paper based, to now all PDFs and DocuSign driving it. So it's completely changed and streamlined that process. That makes a great experience for the customer.

That's what we're really doing. Saying, "Now, look. We're very good at being able to create the marketing demand and the customer demand. It's applying that technology." And then we still want a broker to have a relationship with a customer. It's such an important purchase that, our customers are still on the phone saying "Look, talk me through the options. Help me understand it. Let me hear another person telling me the options." But what we're doing is getting rid of all the stuff that doesn't add to the quality of advice, or helping you make the decision.

James: For sure.

Scott: It's actually the stuff that usually puts you off making a decision because you go, "Ah. There's all this paperwork I have to do and sign it – documents that I have to go and chase." And that's what ultimately stops the customer going through with the purchase. Traditional brokers are doing a lot of heavy lifting trying to compensate that inefficient process.

James: That's right. Which isn't the best use of their time, when there's technologies out there that can streamline it, surely?

Scott: That's exactly right. It's where AFG, the partnership we have with them now ... They have been fantastic in supporting us on this journey. They see the benefits as we're pioneering and solving these, ultimately those technologies become more and more accepted by the banks and mainstream, then more traditional brokers are also picking up those technologies. The technology ultimately trickles down. It doesn't matter what industry.

That's where we've really played that role to lead the industry in how we get to conditionally approved home loans. We're doing a large amount of volume. Over a third of our loans are now going through that process. The fact that we can now get, with one of the lenders, a 12 hour formal approval, I mean, that's ground breaking from lodgement. To be able to just go, "Bang. You're done." We see overseas and in the US market you can find a home and settle in 24 hours and that's when we started to sit back and go, "Well hang on, if it's possible, what's stopping us here in Australia?"

No doubt, there are some parts of legislation we absolutely need to ... We had differences at certain steps of the process. But most of it is, "We've always done it this way", or no one’s applied the right technologies to streamline those pain points for the customer. Therefore, that's the process we've been on for the last couple of years.

James: Like you said, you're writing some decent volumes. I'll just list them here because we've got the stats from the top 25 brokerages here. So loans settled in FY'16 is 961 and total volumes of 104 million dollars. With those figures in mind, with what you've done over that financial year, what are some of the goals you've got going forward? What sort of growth can you expect to achieve with the team you've got? Or are you looking to grow?

Scott: Yeah, no, we are looking to grow. The process we've really been working on, especially heavily in the last 12 months, is deploying this technology and if you like, test and learn. We actually go through and phase it, is it doing what we expect? Therefore, you've almost solved one leakage point and then get to the next one and you're working through that pipe and those challenges. By the end of June, we'll be over 1000 loans. So I think when we did the application we've had more ... So we're breaking through that thousand loan mark. I'd like to see us really quadrupling our volumes. So you're sort of heading towards that next couple of years that capital gain dollar settlement mark. We're starting to really get that scale and leverage the marketing demand and therefore building the number of advisers and brokers that we have.

James: Do you have ambitions to be one of the biggest brokers in the country?

Scott: We're always trying to help serve our customers, and if you look at the customer demand we have, we certainly ... We've probably got as many leads as what you'd say a lot of the Big 4 banks would get. So it's not a matter of demand, it's about how do we get that efficient process. Ultimately if we do a good job, then the customer is going to choose the sharper ... I wouldn't say we've got a view on that we're going to be the biggest broker in the country. We're just going to try and serve as many customers as possible as best we can.

James: Good stuff. Well congratulations once again on being in this year’s ranking, and really good to speak with you Scott.