PwC advises lenders on client engagement in Digital Mortgage 2.0 era

16 May 2018 8 min. read

An emerging ‘homeownership ecosystem’ will bring technology firms and other outsiders into the mortgage mix, a new report from PwC predicts. Digitalization has led to a paradigm shift in consumer expectations that lenders must adapt to in order to survive in a rapidly evolving sector.

Banks are spending billions on digital services and mobile apps in a bid to broaden their appeal to young home buyers, while staying ahead of the technological curve. But that might not be enough, cautions Big Four firm PwC in new analysis which encourages lenders to develop new business strategies around changing client expectations.

Produced by PwC’s Consumer Finance team, the report explains how AI-driven hyper-personalization of client services, the debut of design thinking and gamification, and automation are set to transform the lending industry. These disruptive changes and other market trends amount to what the authors describe as “Digital Mortgage 2.0 – a paradigm shift in customer experience.”

Underpinning this next stage in the evolution of digital mortgages is the assumption among borrowers that they can conduct most of their business online. Modern consumers expect lenders to be at the forefront of digital technology, offering them a deeply interactive and customized experience. PwC expects this will include proactive utilities which use advanced analytics to offer consumers solutions to problems they weren’t even aware they had.

To support their analysis, report authors Roberto Hernandez and Peter Pollini – both Principals at PwC Consumer Finance – present strong evidence that borrowers routinely expect digital solutions along every step of the value chain. “Email has surpassed phone calls as the most common type of communication between borrowers and lenders across all channels,” says Hernandez, noting that borrowers are four times more likely to regularly write emails than visit their bank in person.

Percent of recent purchase customers using online tools Large majorities of consumers are embracing digital tools too. More than eight in ten have submitted mortgage forms online, while 76% have accessed online educational tools about the mortgage process. Borrowers are also keen to use affordability calculators and loan status portals as simple alternatives to making a call or communicating directly with lenders.

But the most interesting development is the changing customer expectations surrounding their use of digital tools. “Consumers want digital tools to give them more control over their borrowing experience and to enable their chosen experience to be as streamlined and efficient as possible,” says Hernandez – who speaks regularly at US mortgage industry conferences. He cites the emergence of the “omni-digital” customer who engages with a range of digital communication channels.

In fact many of PwC’s survey questions to borrowers a few years ago wouldn’t make sense today, he says, when consumers don’t distinguish between face-to-face, video, or chatbot communication, but might expect to do them all at once. Banks, argues Hernandez, should have a “reduced focus on whether customers want digital tools and more focus on how they use them.” This must go hand-in-hand with the recognition that customers might be using multiple tools and that these tools serve different purposes.

PwC’s latest survey found that consumers of banking services could be divided across two primary dimensions regarding the experience they are looking for – support and engagement.

Level of support x level of engagementThe support dimension concerns ‘information desired’ and runs the spectrum from those who want to know every detail along every step in the process, to others who Hernandez says “want a Wizard of Oz mortgage with everything handled out of sight behind the curtains.” The degree of human interaction is the chief concern of the engagement dimension. Some consumers prefer self-service, while others feel better with an expert advisor holding their hand through the process.

The result is that different customers are using digital tools for entirely different purposes and have radically varying subjective opinions over how those tools are suited, not only to their financial circumstances, but also to their emotional and psychological needs. “This highlights the importance of giving consumers control over their experience,” concludes Hernandez.

Emotional intelligence

One key takeaway from the insight that lenders need to begin understanding their borrowers in a psychological, as opposed to strictly financial, sense is that the beginning of the loan lifecycle is pushed back. Rather than first engaging with borrowers when they formally begin house hunting, lenders will use Big Data, AI and advanced analytics to identify people who might be considering buying a new home, or could be encouraged to do so with a nudge in the right direction.

“Lenders often think of a home purchase as a purely financial transaction–and for some investors, it might be – but personal factors play a major role for the vast majority of buyers,” says Pollini – who has 20 years experience in banking and financial services. “Some lenders have begun interacting with customers much earlier in their home-buying journeys and are becoming more actively involved in areas such as helping borrowers choose a real estate agent.” These lenders, he notes, can position themselves as trusted advisors on the transaction and thus establish a higher level of brand loyalty.

Pollini stresses that this doesn’t mean lenders should aggressively push mortgage products to consumers still deliberating on whether they even want to move. Instead the PwC report calls for lenders to reimagine their role and position themselves as guides who can help borrowers navigate the entire home-buying process.

Reasons for buying amongst recent homebuyers “Borrowers expect their lenders to help them coordinate all of the complex moving parts across the end-to-end home buying experience,” he says. This includes questions often tackled by realtors or family members, such as “Where should I live?” and “How will a move impact my lifestyle?”

“Additionally, we expect current industry trends toward vertical integration will continue. Lenders are partnering with others in the ecosystem such as builders, contractors, moving companies, and other service providers. We see a strong movement toward an interconnected homeownership ecosystem, and lenders who strongly position themselves with key partners will be more likely to achieve long-term success.”

Digital personas

Engaging with borrowers earlier in the loan lifecycle and partnering with other actors from the tech, insurance and construction industries are just two of the key recommendations put forward by PwC. One of the report’s most significant findings suggest, however, that lenders still have much more to do if they want to attract and maintain new borrowers.

Net customer loyalty metrics“Despite the investments that many lenders have made, average customer satisfaction for mortgage lenders remains well below the standards seen in other industries,” says Hernandez. PwC’s polling of more than 1,600 recent and prospective borrowers found that just 13% would recommend their lenders refinancing services to others, or use them again themselves. 

By contrast, the same borrowers reported high levels of satisfaction with digital tools. Large majorities said they were ‘extremely satisfied’ or ‘satisfied’ with online saving tools, mortgage calculators, application systems and loan portals, among other online services provided by lenders.


Level of satisfaction with digital tools amongst users To capitalize on borrower enthusiasm for customized digital services, PwC advise lenders to let consumers “choose their own adventure” by binning the one-size-fits-all approach and recognizing that different borrower personas demand the development of “multiple lender personas which mirror the different borrower segments.”

Hernandez and Pollini advise lenders on four industry priorities, each of which relates to improving their digital offering. These include increased agility, reducing borrower fallout, investing in digital technology, and expanding the scope of their digital services. These priorities reflect anticipated industry trends towards higher use of mobile apps, customer comfort with virtual assistance, and the rise of aggregators used by borrowers to compare lenders.

But the rise of digital won’t necessarily be absolute. One trend to look out for identified by PwC is “digital blowback”, which is expected to see a large segment of customers “demand more authentic human communication” as part of a broader resistance to social media influence and desire to reduce screen time.