Creating Stickier e-Mortgage Customers

“In essence, bank loyalty is not a factor for borrowers in shopping for a mortgage loan.”

That was the conclusion of Accenture in last year’s Digital Banking Survey (an excellent report we haven’t had the opportunity to cover until now). 

The consulting firm elaborated by stating:

  • “…Banks are in the unenviable position of competing in a commoditizing industry.”
  • “Differentiation based on price or products and services is a zero-sum game for many banks. They get trapped in an endless loop of one-upping and matching each other on discounts and product offers where no one wins.”
  • “Brands ultimately become interchangeable in customers’ eyes.”
  • “Borrowers tend to select a mortgage originator based on product price and their expectation for an easy, speedy transaction process.”
  • “Consumer perceptions that switching is hard have eased…”

Accenture listed an assortment of strategies that banks can use to win over today’s new breed of customers. It just so happens that all of those ideas can also be adopted by forward-thinking mortgage brokers and non-bank lenders.

Many of its recommendations are online related, which is not coincidental. Last year, Accenture found that, “For the first time in our research, consumers ranked online banking services as the number one reason for staying with their bank, ahead of branch locations and low fees.”

Among other things, the firm suggested that banks:

  • Add robust mortgage research tools to their websites.
  • Automate back-end systems to provide real-time approval and closing updates.
  • Incent borrowers to download the bank’s mobile app.
  • Develop self-serve interfaces so borrowers can submit documents, track deal status and electronically close mortgages via their computer or smartphone. (The goal: cut back-office staffing and fulfillment costs.)
  • Provide term and product advice to borrowers via video chat.
  • Securely share mortgage closing statuses with realtors (if the client consents).
  • Facilitate connections between borrowers and service providers (e.g.,  home inspectors, renovators, handymen, movers, lawn services, furniture retailers, lawyers and so on).

In 2015, almost 7 in 10 Canadians surveyed preferred to get their mortgage from their primary bank, says Accenture. But change is in the air.

The firm asked that same group how they’d categorize the relationship with their bank. Three out of four (75%) characterized it as merely “transactional,” as opposed to an “advice-driven” relationship. (That was up 10 percentage points from the prior year.)

Meanwhile, close to half (46%) of consumers said they’d be willing to receive robo-advice in lieu of human advice. People cited speed and convenience as the #1 reason why. What an eye-opening stat given that mortgage advisors’ raison d’être is personal guidance.

“The digital borrower’s need for a loan officer can be satisfied via call centre and online chat capabilities,” Accenture added.

That said, we’re still far from the point where the Internet replaces face-to-face contact throughout the mortgage process. A full 79% of borrowers still get mortgages in a branch or office. Canada’s major banks and their armies of mortgage specialists and branch reps remain dominant, but dominance is not insurmountable. In the U.S., despite its structural banking differences, only 44% of borrowers get a mortgage through a branch/office location.

  1. Hi Rob,

    One area a mortgage broker can add value and take business away from banks is to team up with an advisor who does cash flow planning. The benefit to the clients is they can add (for the average family with an income of $150,000) at least $300,000 over the next ten years without any risk. Would that be interesting? The next step (if you can prove it) is to charge a fee for this service. How many banks do cash flow planning? For some people, this may not be for them. Most people however, would be at least curious.

    Most people make a reasonable income but are not satisfied with the amount they are saving and have no idea where the money goes at the end of the month.

    Can’t get this from Robo-advice, they don’t do cash flow planning.

    There are advisors in most provinces that can work with mortgage brokers and make the business stick.

  2. Great Post Rob, the future is coming although it feels like it is moving very slowly some days. It just makes sense, every day consumers think about doing more transactions on the web, everyday they become more comfortable with making important decisions without face to face meetings, every day they research important complicated matters digitally: ask every medical doctor after their patient has questioned the diagnosis based on what the patient read on WebMD. Look, there is still a need for person to person professional contact on big purchases and major decisions (no one is thinking about DIY cosmetic surgery) but I think over the next 10 years the mortgage broker who wants to depend on brilliant advise, the ability to create intense personal relationships and maintain fantastic referral sources will continue to flourish only if they are pure geniuses at it. The best will always prosper but only those top 20% of traditional mortgage brokers and those who trade on extreme community relationships will find a bright future in the next decade. The commoditization of our business will continue apace.

  3. Great post and summary, and truly blows my mind that very few people see the industry for what it is (Ron being one of the few who see it and are taking advantage of it).

    Interesting that it’s mentioned that differentiation on price or products is a zero-sum game, as that’s essentially what we’re facing right now in the mortgage industry – it makes no sense for lenders to offer better rates or commission on their products as it just drives the market down and becomes a race to the bottom, and the same can be said for mortgage brokers, however; that’s what we face now that all products are pretty much the same and once a few more people start doing it, the rest will need to follow in order to remain competitive. Mortgages have become commoditized and the difference in a mortgage between most places is minimal (some features are different, such as the payout penalty calculation, but at some point that may very well change if it becomes an issue for the banks who have a piece in the non-broker market share).

    Unfortunately service and advice are not proprietary and at the end of the day, the client is looking for the lowest price to pay and if someone can offer the same product for cheaper the client will likely end up there, (all things remaining equal).

  4. As a consumer who just last week closed a large mortgage renewal with a broker, I can add some perspective. My broker ultimately found me the best rate and features, but I was prepared to go with him even if my former lender (a big bank) matched or marginally beat his product, for the simple reason that I knew he was in my corner they whole way along the journey. It was not a simple task to decide among the many options and my broker’s expert advice and trust that we developed were invaluable. It certainly helped that he was very aggressive in buying down my rate. I don’t know what he ultimately got paid, but it was probably not enough. Thanks again Rob.

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