The digital revolution in the mortgage market is nothing new. Indeed, much of the conversation in the industry in 2017 centred around how the intermediary sector could compete with technological developments in the lender community. However, late last year, things took an even more interesting turn with the introduction of artificial intelligence.
Mortgage broker Nuvo soft-launched into the market in December. The broker uses specially developed smart technology and AI to power a chatbot that talks to borrowers through Facebook messenger. According to reports the chatbot will ask the borrower a series of questions before searching over 50,000 mortgage products in a matter of minutes and recommending the right product for the borrower.
It’s a service that is responding to the desires of the social media generation and is likely to be popular as a result but it does raise some questions.
The boundary between advice and information has always been somewhat murky and the development of chatbots only adds to this confusion. Such technology is being developed to fill the gap between brokers and price comparison websites – and that’s certainly a gap that needs filling – but its role remains undefined, particularly from a compliance point of view.
The key question in this situation is whether such chatbots are giving advice and how that advice is given. Are conversations controlled and monitored by an experienced – and qualified – broker? In which case, is this really an AI-powered technological advancement or simply a broker using a chat facility? Or is it more likely the case that a number of conversations are not monitored? That often conversations go unchecked and the borrower is shown a number of suitable products is much the same way a sourcing system will do, under the illusion they are recommended by a qualified professional? This is where things get complicated.
Technology is the future of the mortgage market but we must make sure risk is not increased as a result and any new developments are always supported by proper compliance and safety considerations.
For years now the prospect of a major technological revolution in the mortgage market has been hinted at but never actually came to fruition. I think 2018 is going to be the year we finally see it.
Communication and the methods in which the industry converses with its clients will be a priority. Indeed, the whole premise of the much talked about robo-advice initiative is a response to the consumer demand for more efficient communication and a more streamlined service. With a number of firms exploring the idea it stands to reason that this year will be the one in which we see some real progress in this area.
Several firms within the industry are already employing real time live chat solutions, the natural next step will be the emergence of artificial intelligence. Chat bots may not quite become the norm straight away but forward thinking firms will certainly embrace them.
The launch of open banking this month across the top nine banks – including Barclays and HSBC – will have a huge impact on the market by giving consumers the chance to take control of their own financial data and who can access it. This access should also allow lenders to speed up affordability checks and verification of income and outgoings. Indeed the initiative offers huge potential for the market and should be welcome as opposed to feared.
That being said the implementation of the revised Payment Services Directive (PSD2) – the legislation behind the open banking initiative – coincides with that of the General Data Protection Regulation, with its increased safeguarding requirements. It will certainly be interesting to see how these two initiatives work together.
And of course a year in the mortgage market wouldn’t be complete without the FCA ringing in the changes. 2018 will see the next stage of the Financial Conduct Authority’s work on lending into retirement – a long overdue review and one that should benefit the large number of older borrowers who are being penalised by antiquated rules.
While certainty is not a word that applies to much in the UK at the moment, I think we can say with some conviction that 2018 will be the year that technology dominates the sector. It has, of course, played a supporting role in the industry for many years now and is becoming an ever more essential part of brokers day to day working life. However two new developments could significantly change the market beyond recognition.
Few issues have caused more jitters in the mortgage industry than the so-called interest only time bomb. Ever since it became clear that the endowment policies of the 1990s and early 2000s were mis-sold there has been concern over how interest only borrowers would repay their loans at the end of the mortgage term. Add to this of course the fact that such mortgages continued to be sold (in large qualities) in the run up the credit crunch and it’s not hard to see why there’s so much unease.
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