For much of the past decade the mortgage industry’s technology conversation has been dominated by origination. Faster decisions in principle, reduced application to offer times, digital journeys, automated affordability and document recognition have all been held up as examples of progress, and rightly so. Lenders have invested heavily in the front end of the mortgage journey because that is where growth is won, market share is gained and where brokers and borrowers form their first impressions of a brand.
The difficulty is that mortgages do not end at completion. Indeed, in the current market, there is a strong argument that the most important part of the customer relationship begins afterwards.
As rates have risen and fallen, as refinancing activity has increased and as product transfers have become a strategic battleground, lenders have found themselves managing a growing volume of customer interactions that sit beyond the original mortgage application. Borrowers want to switch products, make overpayments, extend terms, alter repayment methods, add or remove parties from a mortgage or seek support when circumstances change. Regulators, meanwhile, quite rightly expect these interactions to be managed consistently, fairly and with clear evidence of customer outcomes.
Yet many lenders remain constrained by technology estates that were designed for a different era. The findings of Fignum’s Mortgage Tech Pulse research are revealing in this respect. While lenders reported significant progress in many areas of origination technology, post-contract servicing consistently emerged as one of the areas where technology capability lagged behind both customer expectations and business ambitions. Across the market there was widespread acknowledgement that existing technology arrangements are increasingly struggling to support future operating requirements, particularly in servicing and customer management.
That should not come as a surprise as mortgage servicing has historically been viewed as an administrative necessity (the poor relation in terms of investment) rather than a source of competitive advantage. As a result, many lenders have accumulated layers of systems, processes and workarounds which function adequately when volumes are predictable and customer requirements are relatively simple but become increasingly cumbersome when flexibility is required. The result is that many post-contract variations remain surprisingly manual.
In some organisations, requests trigger processes that look remarkably similar to a new mortgage application. Information is gathered multiple times, operational teams intervene at various stages and decision making becomes dependent upon institutional knowledge rather than embedded workflows. None of this is necessarily visible to customers until they need to make a change, at which point the contrast between the digital experience they received at application and the servicing experience they receive afterwards can become stark.
What is interesting is that the market increasingly recognises this as a strategic problem rather than merely an operational one. The Fignum research found that lenders are placing growing emphasis on agility, operational efficiency and the optimisation of operating models, particularly as they seek to balance regulatory expectations, customer outcomes and profitability. There was also broad agreement that the cost of standing still is beginning to exceed the cost of change, a significant observation in a market not traditionally known for rushing into technology transformation.
There remains a tendency within financial services to assume that transformation requires replacement. In reality, most lenders need evolution rather than revolution. They need ways of improving customer journeys, automating workflows, enhancing visibility and introducing consistent decision making without creating unnecessary disruption to the core platforms that continue to perform critical operational functions.
In a recent discussion, our CEO Andrew Lloyd described a view of mortgage technology that is less focused on replacing infrastructure and more focused on unlocking capability. The distinction is important because it reflects the reality faced by most lenders. The issue is rarely a complete absence of technology. More often it is the inability of existing systems to work together effectively or adapt quickly enough to support changing customer needs.
Post-contract variations are perhaps the clearest example of this challenge as they sit at the intersection of customer experience, operational efficiency, compliance and retention. They require information from multiple systems, involve varying levels of risk assessment and demand clear auditability throughout the process. They are precisely the type of activity that exposes the limitations of fragmented technology estates while simultaneously offering some of the clearest returns from modernisation.
Fignum’s approach addresses this by enabling lenders to create digital journeys and workflow-driven processes around existing infrastructures rather than insisting those infrastructures are replaced before progress can be made. In practical terms, this means lenders can automate and orchestrate variation processes, improve visibility, reduce manual intervention and create a more consistent experience for both customers and operational teams while continuing to leverage the systems they already have in place.
The mortgage market has spent years optimising origination. It now faces the challenge of applying that same thinking to servicing. Product transfers, retention, customer outcomes and operational efficiency are becoming increasingly interconnected and nowhere is that more evident than in the growing demand for effective post-contract variation capability.
For many lenders, this may prove to be the next major technology battleground because the market, regulators and customers are all moving in the same direction. As long as affordability limits borrower choice post contract variations of all sorts will need to evolve.
Steve Carruthers is growth director at Fignum