In November 2017, The Adviser hosted a three-day study tour to San Francisco, where delegates heard how Silicon Valley is adopting new technology, machine learning and artificial intelligence to make mortgages and property purchases more efficient, interactive and personalised. We reveal some of the key findings of The Adviser’s US Study Tour 2017.
IF YOU’D asked me before I went to San Francisco what I thought I’d learn from The Adviser’s US Study Tour, I’d have answered along the lines of “how to use cutting-edge technology to make loan writing easier”. But, I learned so much more than that.
Firstly, I learned that technology being developed in the United States is formidable, and could change the way we live — and interact — within my lifetime. Opening the conference was Jonathan Miranda, director of strategy, technology at Salesforce, who provided an overview of some of the things that are already in the market that are changing lives.
He gave the example of AI that can read X-rays and scans and can sort them for a doctor’s review based on its assessment of risk, and the films deemed most urgent are reviewed first, potentially saving lives. He highlighted that there are now prosthetic limbs that are not only controlled by the brain but also send messages back to the brain, enabling the wearer to “feel”.
Mr Miranda also revealed that his children wear Autism Glass spectacles, which utilise a camera and AI to read the facial expressions of the people around them and deliver real-time social clues to help them better identify behavioural intentions. These are incredible inventions that are providing real value to the users and making their life easier. But the real area of focus in Silicon Valley is not hardware or software — it’s data.
Mr Miranda said: “There is so much data out there and companies are only just starting to figure out what is the importance of data. Data is the oil for a lot of us… and companies are starting to figure out that if they are transparent about this and share this information with their customers, it’s actually providing a better experience and they actually have a lot more trust with your company.”
Big data could provide personalised mortgage rates
According to Anil Arora, chief executive of financial services data aggregation and analytics platform Envestnet® | Yodlee®, society is on the brink of a new era: the data era.
Mr Arora explained: “We are on the verge of, I think, the next big revolution, which, in my opinion, will be greater, having lived through a couple of the earlier ones. It’ll be bigger than the PC revolution. It’ll be bigger than the software revolution. It’ll be faster to market than each one of those revolutions as well.”
Mr Arora added that while data is the next big thing, it’s important to remember who the data belongs to. “There is no question whose data this is,” the CEO said.
“This is the customer’s data and we can all fight over which piece of it we can share or not, but it is the customer’s data. It is definitely not the fintech’s data or the bank’s data or the technology company’s data.
“It is the customer’s data. And the customer has to be in the driver’s seat. And what they’re saying to us is, ‘Look. I’m not just going to share this information, but if you create value for me, then I’m going to be open to sharing that information’.”
He suggested that big data and machine learning could soon help lenders offer tailored mortgages based on the real-time financial picture of a borrower.
“The average US citizen is sitting on about 15 financial accounts across an average of seven institutions,” Mr Arora said. “You’ve got various parts of your financial life fragmented across different accounts and different institutions. But we can look at all that.”
Yodlee currently offers its risk insight solutions as a white label product to banks, and it’s here that the CEO suggested the tailored mortgage solutions could be adopted.
“We can use the data from Bank of America, for example, to say
we will be at some point also going live in Australia. The one last geography that we have to crack over there is the big four banks.”
Human-level AI is 30 years away
While many may be concerned that AI and machine learning could displace jobs, according to Salesforce’s Jonathan Miranda, “human-level AI” will not become “general” for at least another 30 years.
He added: “AI is not going to take our jobs immediately; the reality is that anything that is human-level AI or a general AI is decades away.”
Mr Miranda said that AI in CRM systems will have a “huge impact on businesses”, adding that — for the time being, at least — jobs are safe because the technology is still not able to provide that “human” experience and lacks empathy.
Noting that Time magazine ran a story in the 1960s warning about job losses in the face of technology, the director said that with every technology wave, human beings have had a negative reaction, despite tech having a positive impact on job creation.
“It happens every single time. Every single time a new technology comes out, we think it’s going to destroy everything. But in reality, we always have jobs and employment goes up. And part of that is just because of the failure of imagination. It’s easier to think about the negative impacts of the future rather than the positive.
“[But] technology has always created more jobs. They’re different jobs, jobs change, but there is always an increase in jobs.” Mr Miranda outlined that the jobs that are subject to disruption will be the ones that have to do with data entry or that have a large amount of data processing within them. As such, this could change the face of mortgage broking by removing the loan processing, administrative and compliance jobs.
“AI in CRM has a huge impact on businesses.... AI [can] change the game by taking away one little task that was generally a painstaking process for an employee and change it so it is easier from beginning to end. “[But] when do we actually get the human level of intelligence, when do we get general AI? In reality, what we’ve seen is that it will take 30, 40 years.”
The Salesforce futurist elaborated: “AI is not meant to replace people but to make them more productive.
“If you do data collection or data processing, or predictable physical work, you will have that done with AI and all the other jobs are going to become the number one focus.
“If you spend half the time in front of the customer and half the time entering data, it’s going to change. [You’re] going to be in front of customers at all times.”
Mr Miranda, therefore, suggested that people should “focus on the human skills of empathy and connection”.
He explained: “Because human beings have a lot of tacit knowledge. Tacit knowledge that humans have will help you have a better conversation and better connection with people than the AI ever will for a very long time.
“[So,] it’s about the customer experience. Where employees were spending a lot of time behind the computer screen or on the phone and not on the customer, they were not spending a lot of time trying to figure out: ‘How can I make this a painless process for you?’ So, [this will] be changing the role to make it more empathetic to have a better relationship and a stronger experience for customers.”
Stephen Bulfer, co-founder and CEO of digital mortgage platform StreamLoan, agreed, stating that the adoption and progression of artificial intelligence could enable brokers to provide a more customised and valuable offering to their customers.
Speaking about the US mortgage market, Mr Bulfer said: “With the use of data, we can manage debt-to-income, loan-to-value, etc., and we can get really smart on putting the right financial products in front of the right people by better understanding the simple requirements and matching those against the consumer.
“If you can identify that opportunity or insight for potential borrowers and get it in front of them, they are probably going to go with you, rather than waiting, or having another broker or loan officer chase that down.”
‘Move away from being a broker’
This concept of becoming a trusted adviser, and relying on the emotion and trust aspects of mortgage broking, was also a key theme from author, broker and High Trust mortgage sales training specialist Todd Duncan.
Mr Duncan said that brokers should be focusing on improving culture and building trust if they are to succeed, as the dominance of technology means that “the trust barometer is really suffering”.
He explained: “What we see in the world is that the trust barometer is really, really suffering right now. We see world trust declining, we see corporate trust declining, we see financial sector trust declining, we see trust in a one-to-one relationship being held at suspicion if there’s not some direct referral, or some previous knowledge or existence of that person and what they do. And what I know about trust is that it really becomes the most important selling proposition that anybody has [in mortgage broking].”
Mr Duncan gave the example of the US bank Wells Fargo, which recently lost billions of dollars of deposits because of a perceived “low trust culture, with incentivised sales and compliance and regulation deficiencies”.
Therefore, the best companies make it a “mandate” to have every sales activity centred around empathy and emotional connection, as that is the unique trait of humans that technology has not been able to replicate, and is one which is the fastest at establishing trust.
The Duncan Group founder said: “It’s not about coverage, it’s not about advertising, it’s not about marketing, it’s not about any of that. It is about, at the very essence, the heartbeat between two human beings. One’s a specialist and one’s in need of advice around the most important decision they’re ever going to make in their household, which is buying and financing real estate.
“Plus, customers with an emotional investment in the business are more likely to turn into repeat long-term customers, and customers with an emotional connection to your business are likely to recommend your business to others.”
Mr Duncan told delegates that brokers should thus start building trust by moving away from branding themselves as brokers, but instead marketing their companies as “a professional mortgage practice”.
“I would even move away from being a broker. I would rebrand myself, I would rebrand the way that I operate. I want to position myself as having a professional mortgage practice, and I want this to be my brand.” Mr Duncan concluded: “I think you need to begin to look at what you’re doing in the marketplace to have unadulterated, unequivocal, rating-supported, compliance driven trust.
“Because if you have high trust, you shorten sale cycles. If you have high trust, you lower loan expense. If you have high trust, you accelerate the referral networks that are available to you in your marketplace that are just screaming for this kind of solution. And if you don’t have that, then you have nothing.”
But while we heard about the amazing technology coming out of the US market, it’s important to note that the US mortgage system is incredibly convoluted, bureaucratic and surprisingly cumbersome for the borrower.
Unlike in Australia, where a borrower gets a mortgage and deals with the same institution to receive their loan and pay it off (unless they refinance it elsewhere), in the United States, a lender doesn’t hold on to a mortgage for long. Instead, the loan itself is bought and sold multiple times. So, oftentimes, a borrower will receive a letter in the post telling them that a new company has bought their loan, and they should redirect their repayments elsewhere. It’s a clunky process.
The process is made clunkier still by the fact that a borrower doesn’t just deal with one person for their loan; they have to visit at least three people before the loan is even settled.
Speaking to The Adviser following the US Study Tour, delegate Tony Carn, sales director at NextGen.Net, shared: “The US has really good innovation and idea, but Australia has the benefit of being a smaller market and being able to deliver through much better collaboration.
“We probably have around 60 lenders in the market. But the US has around 7,000. That makes the delivery of pre-standardised solutions, dare I say, almost impossible. So, I think we’re lucky that here in Australia, a smaller market means we can work together to make digital mortgages a reality, and hopefully take up some of the innovation from the US and put it into practice, relatively easily, here. We just need people to embrace the change that’s in front of us, and the opportunity in that technology to be really instrumental tools in helping us do our jobs better.”
With all this knowledge, I have this as a final takeaway from The Adviser’s US Study Tour: We should be so grateful that we have a relatively standardised market here, and that we have brokers that will do all the heavy lifting for borrowers.
With brokers in Australia making the process so much easier for the consumer, and with the regulator focused on “good consumer outcomes”, we will undoubtedly see Australia’s broker share rise to greater heights in 2018 — and help make the brave new world of AI and digitised mortgages seem less alien.
Many thanks to all the speakers who contributed to The Adviser’s US Study Tour. Thanks also go to financial services executive Steve Weston and StreamLoan CEO Stephen Bulfer for helping arrange the conference.
The Adviser will be hosting a study tour to Hong Kong in 2018. For more information, please contact [email protected] momentummedia.com.au.
INTERESTING DATA-DRIVEN SOLUTIONS COMING OUT OF THE US
STREAMLOAN With so many players involved in the mortgage process in the US, StreamLoan has been making waves by bringing the major players together in one platform. This app aims to reduce the 40+ day home loan process by connecting borrower, lender, real estate agent and relevant home purchase stakeholders.
The platform can collect, manage and share data and documents through system integrations, such as LOS software, CRM, credit, employment verification, banks, pricing and other legacy systems. It also enables documents — such as pre-approval letters, disclosures, purchase contracts, appraisals and other pertinent home purchase documents — to be shared between relevant parties, reducing rework and gathering real-time data (from banks, insurance companies, tax payroll, etc.). streamloan.io
ENVESTNET | YODLEE RISK INSIGHT SOLUTIONS This solution provides reports designed to supplement traditional credit reports by utilising consumer-permissioned aggregated data from over 16,000 sources, including banking, investment, loan and credit card information.
This can help provide a more holistic overview of a consumer’s financial picture and can change the outcome of lending decisions, especially for subprime borrowers or those without a credit score. yodlee.com/solutions/industry-solutions/risk-insights/
OPENDOOR This platform enables vendors to list their home details online and receive an indicative offer in “just a few clicks” (around 24 hours), as it is the platform itself that buys the home (and creates an offer based on real-time analytics).
After a home assessment, the platform will arrange for any repairs (and deduct the costs) and pay the vendor within a few days. Opendoor then handles the maintenance of the home and sells it on to a buyer. The platform also offers a buyer function, where app users can visit Opendoor homes for sale and make an offer. opendoor.com
MELLO Owned by data-driven lender loanDepot, the $80 million mello platform is an end-to-end web-based consumer portal, a mobile point of sale system and a fully digital mortgage loan application.
The 24/7 platform can reportedly deliver credit applications, side-by-side product options and pricing, loan offers, pre-qualifications and loan approval notifications in just minutes.
LoanDepot’s web-based mobile point of sale system enables loan officers to give borrowers accurate quotes, pricing, offers and pre-qualification letters, with the technology working in the background to complete the loan application in real time. loandepot.com/blog/inside-look-loan-depot-mello
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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