THE DIGITAL DISRUPTION IN HOME LOANS REPORT: How fintechs are upending the mortgage space and creating opportunities for retail banks

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Mortgages are valuable for retail banks, but they’re also complex issues. In the UK alone, mortgages account for almost 60% of retail banks’ profits. But mortgage be fitting can be a complicated process — it involves estate agents, appraisers, and conveyance powers.

This complexity has resulted in major consumer pain points, with a lack of understanding of mortgages, inconvenient access channels, and difficulty switching providers. In an increasingly digital view, tech-savvy consumers are starting to demand simpler ways to take out mortgages, and legacy providers are agony. In the US, the top three incumbent lenders together captured about 45% of the whole mortgage market in 2011; they hold just 24% in 2017.

But a new caste of mortgage-focused startups have developed a range of business models to lend a hand incumbents update this valuable product for the digital age. Their games vary between geographies: In countries like the US and UK, where homeownership is culturally noted, they help incumbents keep consumers interested in taking out severely loans.

Meanwhile, in countries like Germany and Switzerland, where human being prefer renting, they help incumbents attract new mortgage buyers. Some incumbents are already partnering with these players, while others deliver opted to launch in-house initiatives. Each strategy has its pros and cons, but office-holdings must adopt an approach to avoid losing relevancy and market portion.

There are still some fundamental problems in the insurance market that these days obstacles to innovation — for both startups and incumbents. But there are ways to beaten them while making mortgages more attractive for consumers and upgrading returns for lenders.

In a new report, BI Intelligence looks at the fundamental problems dogging the widely known mortgage process and examines why these flaws are becoming impossible for obligatory mortgage providers to ignore. It also outlines the types of fintechs tracing in to drive innovation in the mortgage space, some current efforts by incumbent banks, and restraints still standing in the way of large-scale change in the mortgage industry, as well as what can be done with reference to them.

Here are some of the key takeaways from the report: 

• Mortgages are aggregate retail banks’ most profitable products, but these lenders beget been slow to adapt mortgages to a digital economy. This has engendered pain points in the customer journey, like inconvenient access grooves, and difficulty switching providers.
• Ignoring these pain points is no longer an way out for incumbents. The rise of alternative, digital-only mortgage firms is putting them subsumed under increasing pressure to make mortgages more attractive.
• Fintech startups should prefer to detected an opportunity in incumbents’ slowness to innovate, and have developed discrete strategies to help them, like broadening their distribution furrows, improving customer relationships, providing attractive front-ends, and making their back-ends varied efficient.
• Some incumbents have instead chosen to innovate their mortgage handles in-house. There are pros and cons to both strategies, which incumbents should weigh in community to add the most value for customers and their own businesses. 

In full, the report:

• Examines the chips in the mortgage status quo that are upsetting consumers and dampening returns for lenders.
• Discusses why mandatory lenders can’t afford to delay innovating any longer around this result.
• Outlines different ways mortgage fintechs are breathing new life into this by-product, including by helping incumbents.
• Looks at some mortgage efforts already underway by occupant lenders, and some considerations that should guide their conjure ups.
• Gives an overview of hurdles still standing in the way of large-scale change in the mortgage array, and how they can be overcome.

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