The Future of Lending - disruptive forces reshaping consumer finance
The Future of Lending is a leading European forum on the disruptive forces reshaping consumer finance. Bringing together a wide spread of representatives from across the industry, from the traditional players through to the new specialist banks, the event provides the opportunity to debate crucial topics, developments and issues the industry faces today.
Now firmly established in its second year, and championed as a meeting place for the thought-leaders of consumer finance, The Future of Lending was a fitting platform to introduce Equiniti Credit Services. The event covers a range of interesting themes from mortgages and personal lending, to the implementation of new technology that’s redefining distribution. Developments in credit decisions, as well as innovation in alternative finance were also on the menu for discussion.
As a sponsor, Equiniti Credit Services had the opportunity to both exhibit and present, showcasing the attributes of the UK’s primary consumer credit technology and outsourced service provider.
We now live in a connected world where we can control heating remotely, track our friends and family with our phones, and make a coffee without even getting off the sofa (almost). ‘Alexa, turn the kettle on’. And, if consumers’ financial expectations are driven by their experiences outside of finance, there’s a lot of innovation ahead. Information and insight in to how consumers think, feel and act is highly valuable. The digital age brings enormous opportunity, which is why Equiniti Credit Services also chose this event to unveil its latest research paper into consumer attitudes to digital finance.
Richard Carter, Equiniti Credit Services’ Managing Director took to the stage as both Chairman of the proceedings and presentation speaker, introducing Equiniti’s digitally enabled consumer loan and mortgage solutions of as well as unveiling the independent research report; ‘Great Expectations: The Demanding Market for Credit’.
Some of the key findings included; ‘69% would consider a loan from another lender if offered at the point of decline,’ revealing a desire by consumers to find a single brand that can help them secure their loan, even if the actual loan doesn’t come from that first site. The research also found that only 11% of those asked felt that social media should be used in credit decisions, supporting growing concerns from consumers around how their data is handled and protected.
So how do you redesign the identity and functionality of a mortgage lender? For Atom the answer is delivering a product entirely through an app. With a digital strategy that is ‘customer obsessed’ Atom doesn’t suffer from historic legacy problems, and claims to deliver a transparent, simpler product, streamlined through automation and efficiency. An open API integration platform drives their offering so intermediaries can interact directly with the platform. Better quality of data capture to make clearer, more reliable decisions, and offering real-time DIPs and mortgage offers, with digital signatures and biometric security underpinning the solution, the process is speeded up entirely, with a current record of application to offer being just 22 minutes.
For the wider lending market, the user experience is still at a level of fluctuating development. Application to cash can still be measured in days, this is unnecessarily lengthy and will be a significant driver in the coming years where endless paper documentation will become obsolete. Similarly the concept of validating a consumer through multiple paper documents is outdated. With the uptake of Apple’s Face ID, consumers are going to become impatient with those who fall behind others’ technology adoption.
Whilst it’s easy to be seduced by the offerings of new market entrants, the future of the lending industry isn’t about knocking the traditional financial providers. However, it was suggested that the future model of banks could evolve more towards that of the Amazon model. Leveraging their familiarity as a trusted, recognisable brand into more of an intermediary collaborative role, offering a gateway to innovation employing separate providers behind the scenes. In the future banks could avoid the issues with legacy systems by offering products and services from trusted third parties.
If mortgages can now be built in a platform created for the gaming market (Atom), the future of the user experience could go beyond the Smartphone and more to an augmented reality solution. For Barclays this is about promoting innovation in their employee culture, understanding customers’ lifestyles, in order to anticipate how they can be better served and, of course, learning from past ;
‘Just because we used to do it that way, doesn’t mean that’s how we do it in the future.’ Laura Joseph, Director of Digital Products & Propositions, Barclays
In 2014 77% of consumers wanted direct communication with their lender if they had a question or query about their loan, in 2017 only 18% want the same thing, (Richard Carter, Equiniti Credit Services) further emphasising the acceptance of digital channels.
In a world where we are ever more online, how do we avoid isolating a market that is offline?
Servicing this sector can be a difficult challenge when the world is changing to meet the needs of a digital generation. Similarly, there are those who simply do not favour newer online technology such as e-signatures and biometrics so flexibility is key. An offering that can constantly innovate without creating inaccessibility is increasingly relevant. In contrast to this, Atom would argue that with a customer base ranging from 18 -99, today’s digital customer is defined by their desire for a technology led experience that is personalised, rather than an age or demographic.
According to Dealflo, consumers’ most frequent complaint is that they didn’t understand the information they were provided with during the application process. New developments such as an electronic carbon copy of documentation to ensure both the lender and borrower hold identical irrefutable evidence, protects the provider as well as the consumer. Delflo claims that moving to robust digital application processes, have resulted in a 90% reduction in on-boarding time for new loan applications
Saving Vs Investing
As Peer-to-Peer lending grows in popularity, so do the options available to consumers to leverage the opportunities it presents. Traditionally savings and investments were treated as two separate products in consumers’ minds but there are lenders who are beginning to blur the lines. According to Ratesetter, savers who don’t diversify their portfolio by investing some of their savings, rather than just than just leaving it to their bank, are missing out.
‘At its most basic P2P lending removes the bank middle man and puts money back in the investors (or savers) pockets,’ Rhydian Lewis, Chief Executive Officer, RateSetter
Connecting providers of capital with the users of capital via direct contracts and reducing the reliance on bank funding, is essentially cutting out the middleman, but is it really that simple? Banks are different from P2P lenders, according to Ratesetter, who are leveraging consumers’ additional funds as arguably a more accessible form of investment. The risk is higher by following this method, but the reward is greater. But in this financial environment the two terms are becoming almost interchangeable, especially when P2P lenders begin to apply for banking licences and introduce current accounts and ISAs.
So why become an actual bank, why not just deliver banking products by partnering with other providers? For Zopa it’s the limitations on the P2P model; if you want to move into mortgages or credit cards, then the capital requirement is so much larger and variable and can’t really be satisfied in the P2P model when investors are seeking yield.
It would be hard to not mention GDPR in an event that is so focused on how to better understand the consumer. Both the structured and unstructured data that consumers submit as part of their lending journey is a vital way of ensuring a best in service approach. The requirements that come from GDPR need to be built into the technology used in finance to ensure the consumer/provider relationship isn’t damaged unnecessarily.
Technology is driving change at a colossal pace. We’ve already seen the first digital only mortgage and we are now witnessing a new ecosystem in the area of digital identities. Further more P2P has reshaped the identity of lending completely, whilst Amazon’s recent expansion into SME lending is causing positive disruption in an innovative space – the take away is there’s no room for complacency, revolution and change is at the forefront of this industry.
In summary the future of lending is about collaboration and investing in the user experience. Creating a seamless digital experience that is forward thinking around how to create longevity in products, that is robust and secure, yet agile and flexible.