A new wave of fintech companies has emerged with solutions covering many aspects of the lending value chain. But what does this mean for brokers? Tas Bindi finds out more.
Technology is an important area of investment for any business. With brokers under intense pressure to ensure that their clients’ financial positions are accurately reflected in loan applications and that they’re acting in the client’s best interests, it could be worthwhile thinking strategically about how technology can be used to adapt to change, operate efficiently and, ultimately, deliver good customer outcomes.
Mike Page, the head of Australia and New Zealand at financial software company MOGOPLUS, observes that “strong customer outcomes, compliance and efficiency improvement are often seen as mutually exclusive in the lending sector”. However, advancements in technology – particularly in how data is captured, stored, interpreted, applied and shared – mean a “triple crown effect of meeting all these goals is now achievable”.
“Like many other consumer engagements today, loan origination is now based on the effective flow of data,” Mr Page says.
At present, the cost of originating a home loan is estimated to range from $2,000 to $8,000, which Mr Page says largely covers the “human resource expense of data collection, administration and paperwork”.
Mr Page points to MOGOPLUS’ integration with Loanapp, an e-lodgement tool developed by Simpology, as an example of how broker workflow can be improved at the point of sale through “more efficient data capture and automated application workflow processes”.
Loanapp reads a lender’s published “electronic guidebook” (containing the lender’s dataset requirements and associated validation business logic, print forms, supporting document rules and serviceability metrics) and presents the most up-to-date lender requirements to the broker.
The integration means that the data entered into Loanapp is captured once, categorised and delivered to the lender’s decisioning system in the required format and structure.
“These improvements drastically reduce the ‘time to yes’ for the broker and the borrower, cut out much of the existing administration burden and subsequently take a big chunk out of the average cost of writing a loan,” Mr Page says.
“Open APIs, the ability to map the data to the rules engines of the lender and simple integrations all now make this a reality.”
Mr Carn expresses a similar sentiment, saying that it’s the availability of APIs and open data that can make life easier for all parties involved in a loan transaction.
“There’s already a lot of APIs in technology ecosystems these days… When a broker is in their CRM system typing in a scenario to find out how much someone can borrow, that’s utilising a real-time API service that’s tapping into a central database of 50 lenders and doing those calculations,” he says.
In fact, Mr Carn believes the need for supporting documents will eventually “become a thing of the past”.
“Everything that’s in an application is verified mainly from the supporting documents that are provided… But there’s a lot of opportunity to source that information and better validate it directly from other sources,” he says.
This is where the mandatory comprehensive credit reporting (CCR) regime, or open banking more broadly, comes in. Mr Carn’s view is that CCR will enable a more efficient means to validate data in applications – even in real time – with the validation process expected to be more accurate and cost-effective for brokers and lenders alike.
“In our world, getting quality right at the point of sale is critical because, ultimately, it drives down costs. [If] there are going to be any changes to [the broker] income structure, reducing costs is paramount,” Mr Carn says.
While still in its early stages, Mr Page believes CCR will play an important role in improving compliance by enabling brokers to see “a more rounded picture of their clients’ financial health”. Further, depending on how the associated data is presented, he says it could also reduce the friction and time spent on loan applications.
“Easily accessing the right data and then moving it from an unstructured state to a structured one is the key,” the head of ANZ at MOGOPLUS says.
“With the right tools, the broker can… further strengthen the [customer] relationship. For example, positive CCR can enable the broker to work with the customer to improve their longer term financial position as richer data is available.”
Mr Carn, on the other hand, notes that there are a number of technologies that aren’t yet being fully utilised by the market.
“I think things such as online identity document verification, that’s a relatively easy thing where lenders can be giving brokers the opportunity to put a passport, Medicare or licence number and validate it. I think we’ll see greater uptake of that,” the NextGen.Net director of sales says.
Virtual verification of identity (VOI) solutions are also starting to get utilised in loan applications. Last year, La Trobe Financial became the first lender in Australia to adopt e4 Australia’s Virtual VOI tool, allowing brokers to make secure video and audio calls to customers, which are overlaid with “key systematic authentication checks”, including facial biometric matching, location tagging and document authentication verification.
On completion of the call, the platform compresses all video and audio records – which are stored for future use and as evidence of due diligence should any dispute arise – and produces a VOI report.
Mr Carn believes the work that brokers do for customers can be much more transparent and traceable using technology, especially in light of the question that was asked by the financial services royal commission: “Who does a broker work for?”
“Brokers are very happy and willing to assist in [facilitating] transactions. But I think the question is, have all lenders really empowered them to do that? Had they done that, I think we would have much greater visibility into or transparency around the value that [brokers] add. That opportunity is still there,” he says.
[Related: Fintech space set to grow in 2019]
Tas Bindi is the features editor for The Adviser magazine. She writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.
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