“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.