Industry Stories

Enhancing the Digital Experience for Australia and New Zealand Mortgage Lenders

While other mortgage markets have struggled, the markets in Australia and New Zealand have recorded strong growth for more than a decade. The value of Australia’s outstanding home mortgages has doubled since the end of 2007, although growth slowed considerably in the past couple of years. In New Zealand, the value of household mortgages has increased by more than 70% since 2007 and was still growing strongly last year.

However, financial institutions in these countries still have many challenges: rising customer expectations, shifting demographics, emerging competitors, and changing regulations. On top of those pressure points, financial services firms now have to manage temporary branch closures, increasing customer questions, and rising credit losses caused by the economic impact of the coronavirus pandemic.

Even with the current crisis, the greatest challenge is likely the competition from non-traditional firms that offer lower rates and faster approval times. In Australia, nonbank lenders grew seven times faster than major banks in 2019, offering lower rates and faster approval times. New digital native companies have raised significant venture capital funding. These challengers are targeting the mortgage market with digital offerings that can be launched rapidly and offer a superior customer experience. For example, 86 400, which calls itself Australia’s “first smartbank,” says it can approve a loan within two hours, without the need for paperwork or a face-to-face meeting.

Accelerating digital transformation is needed across the whole mortgage value chain in order to gain or even just maintain market share. But to improve the customer experience, established mortgage providers would do well to focus on the origination process. This is more complex with mortgages than with many other financial products. However, new technologies are providing a means to make a difference. Some of the digital functionality, which can be introduced in the pre-origination and origination processes, are:

• Goal-based savings plans to lay the groundwork for future mortgage applications.
• Lead generation and prioritization driven by advanced analytics.
• An integrated and compelling Realtor portal to build engagement.
• Pre-filled application forms using internal and external data sources.
• Electronic delivery of all documents and use of e-signatures for closing.
• Real-time customer alerts for status changes and 24/7 tracking of the process.

All these innovations require significant digital capabilities leveraging advanced analytics, artificial intelligence, machine learning, and open APIs. The latter is particularly important when creating an ecosystem of partners to enhance the customer experience. Many mortgage providers are still adding these new capabilities. In a recent Infosys global survey of industry executives, 41% reported they were likely to prioritize developing these capabilities in-house. The same percentage said they were likely to look for external partnerships to gain access to new technology.

The trend to expand digital channels has been growing for several years, although traditional channels are still important. A 2019 Infosys survey of 1,250 consumers found that branch locations were still important factors for many customers. That research found that just over 30% said that they preferred to apply for a home loan at a branch location.

Yet, the world that emerges from this coronavirus crisis is almost certain to be a more digitally-focused one. Consumers are now relying on more digital technology for everything from shopping to education to payments. The increasing use of digital channels is driving existing providers to accelerate their digital transformations. The winners will be those who can transform quickly and efficiently in order to deliver an enhanced customer experience at a lower cost.