The head of a white label provider has revealed that several banks are looking into making the verification of income and expenses an automated and digitised process.
Brett Halliwell, the general manager of Advantedge Financial Services, has said that living expenses — a topic that has come under scrutiny in recent weeks — could be better handled by technology, allowing brokers to be “much more focused on the value-add side”.
Speaking to The Adviser, Mr Halliwell said: “Brokers, to my mind, really perform two distinct functions. One is sourcing leads (and the customers who have the need to obtain finance) and working with that customer to establish their needs and recommend products that will suit them to make sure that they have the right product and right mortgage for their lending needs. The second half of what a broker needs is really about fulfillment — filling out paperwork and doing the responsible lending steps, such as providing verification of different things that are being provided.
“I think the digitisation of that space could be made more efficient. To take an example, one of the key functions of brokers is to verify identity, to verify income, to verify customer expenses and to make inquiries to verify existing liabilities by the customer.
“I think that over time a lot of those steps could be automated and digitised; for example, by obtaining direct access to customer bank accounts and ATO records and effectively examining and making inquiries to the customer’s existing banking arrangements. A lot of that work can actually be done more efficiently and more effectively.”
Mr Halliwell elaborated that “a lot of banks are looking into processes that can do that”, noting that NAB has been “leading the way” with its new “customer journeys” exercise within the mortgage space that “is utilising agile project management techniques to deliver incremental change [and] overall change for the customer experience over time”.
The customer journey teams look at major life events that customers share with the bank (such as finding their first home and applying for a loan) and aim to provide fast, personalised decisions based off the information they have on the customer.
Supported by technology such as chatbots and machine learning, the customer journeys experience aims to make better use of customer data and escalate any roadblocks within 24 hours (with the CEO seeing any unresolved roadblocks within 72 hours) in a bid to deliver solutions more quickly.
The Advantedge GM continued: “I think over time there will be an opportunity for brokers to be much more focused on the value-add side, which is customer-needs–focused, rather than back-office-paperwork [focused]. While [the latter] is very important, it’s not necessarily done as efficiently as it could be.”
Looking forward, Mr Halliwell said that he expected the mortgage industry to continue to see “strong regulatory focus by APRA and also ASIC”, specifically on the area of expense verification.
“I certainly [expect] a move away from standardised industry benchmarks such as HEM to something that is more tailored towards individual customer circumstances.”
‘Industry standard guides’ could be rolled out
Another area that the head of the white label company said could be changed in the near future is the amount and type of information provided to lenders from the third-party channel.
“I think there is going to be an increased need from lenders wanting to have information provided by brokers about customer responses to responsible lending questions,” Mr Halliwell said.
“So, I think that will be enhanced by industry standard guides whereby brokers will be able to document the customer conversations that they have and that will cover responsible lending areas — such as foreseeable changes to circumstances and why they are selecting certain products (i.e., why interest-only is appropriate) — using an interview guide.”
Mr Halliwell added: “That is important because, when you think about the broker-customer experience, the banks aren’t actually dealing with the customers; it is the brokers that are sitting in front of the customer having the conversation with them.
“So, it is important that the banks can be given access to very clear information about the conversation that was held and are given visibility to information that might have been provided either to or from the customer.
“I think there has been some work done by banks within the industry who have been considering what options are available, and I’d expect that individual banks will be making their announcements over the coming weeks.”
Indeed, the first moves in this direction have already been made. Last month, the chairman of the prudential regulator called on lenders to “devote more effort to the collection of realistic living expense estimates from borrowers” and give “greater thought” to the appropriate use and construct of benchmarks.
Speaking at the Australian Securitisation Forum 2017 on 21 November, the chairman of the Australian Prudential Regulation Authority (APRA) said that the regulator had been “increasingly focused on actual lending practices” and “confirmed there is more to do… to improve serviceability measures, particularly in relation to the assessment of living expenses and the identification of a borrower’s existing debts” to ensure that borrowers can afford their mortgages.
The Westpac Group became the latest lender to implement changes to its serviceability calculator (after AMP announced that it was bringing in additional expense requirements).