A number of digital giants have made big investments in the mortgage broking space. Is this disruption or development for the Australian mortgages market?
REA and Domain’s entry into the mortgage market has been largely welcomed by the broking community. However, the presence of digitally-savvy new entrants could present challenges for brokers who may have overlooked technology.
Lendi co-founder and managing director David Hyman sees the next phase of the mortgage broking industry being led by a move to digital.
“Players like ourselves are leading the way there. I’m sure that the ‘generation one’ groups like Aussie and Mortgage Choice will soon have to follow as customer demand shifts,” he says.
Mr Hyman started Australian Credit and Finance, a broking business that aggregates through Connective, almost five years ago and has since launched a string of successful mortgage businesses including Click Loans and Lendi.
In June, Lendi announced a joint venture with Domain Group that will see the real estate portal launch its own broking business, Domain Loan Finder, powered by Lendi’s technology platform.
“Lendi has largely replaced Australian Credit and Finance,” Mr Hyman explains. “We built a national network of mortgage brokers, both phone-based and face-to-face. Lendi has introduced a technology piece that sits between the broker, the customer and the bank.”
Lendi is essentially a customer engagement platform that allows Australian borrowers to create a profile on its site. Behind-the-scenes technology matches customers to different lenders on Lendi’s panel, integrating a multitude of various underwriting criteria with the borrower’s needs to narrow down loan options, packages and structures. A team of brokers and support staff are also on hand to assist via live chat, phone or face-to-face meetings.
“We have over 250 staff in the business across different roles,” Mr Hyman says. “They are using the same platform as the customer and can help them through the process, but the technology does a lot of the work in the middle.
“Consumers ultimately decide the channel they want fulfilment through.”
Despite the rhetoric in the market around mortgage broker commissions and the potential threat of digital disruption, Mr Hyman is confident that the human element will remain a key feature of the third-party channel.
“We think mortgage brokers are here to stay,” he says. “We are a large part of the industry. We just think that advances in technology allow companies like ourselves to plug into what consumers are looking to do.
“Our data tells us that 90 per cent of consumers today are starting their home loan journey online.”
Digital v face-to-face
Customers are unlikely to choose a robot over a human when it comes to obtaining a home loan. Rather, the digital component will assist the journey towards a face-to-face interaction with a broker.
Plus, brokers should be using all the technologies at their disposal to streamline the processes that don’t add value to their core offering.
This is something that web-based brokerage iSelect has been working on since 2012.
In the 2016 financial year, the group settled 961 loans and achieved $404 million in volumes. Chief executive Scott Wilson told The Adviser that he expects volumes to increase significantly as the brokerage streamlines its conversion process.
“I’d like to see us quadrupling our volumes, so heading towards that $2 billion settlement mark over the next couple of years,” Mr Wilson says.
“We are starting to get that scale and leverage the marketing demand. We will continue building the number of brokers we have. We probably get as many leads as the big four banks, so it’s not about demand; it’s about achieving that efficient process. We are going to try and serve as many customers as possible as best we can.”
Brokers provide assistance to clients over the phone, while technology has been used to replace what Mr Wilson calls the “non value-added” processes.
“Three years ago, we looked at digitalising the mortgage process without compromising on the advice given to the customer. Our objective as mortgage brokers is to get people into their homes with the right advice and the right loan as effortlessly as possible,” Mr Wilson says.
“We are just using a series of technologies in the back to strip out all the non value-added steps. Traditionally, brokers would post out an information pack or visit the client for an hour, get to know them and identify their needs, then go away and do the comparison of what loan meets their requirements and then come back again,” he explains.
“In our model, we use the website and technologies in the background to do that in real time. We are doing things like using MOGO to bring in a client’s bank statement and ZipID for identity verification.”
The challenge for brokers looking to adopt a similar strategy lies in integrating these technologies into their business. This is where training and education are essential. Any new technology is an investment of both money and, more importantly, time.
Learning how to use technology effectively is critical. Integrating it into your process will no doubt require time and effort, but it will ultimately streamline your operation in the long run.
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