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HSBC, one of the largest banks in the world, has launched a digital mortgage platform in the US via a partnership with Roostify, the digital lending platform, per a press release. Teaming up with Roostify will help HSBC provide its customers with a faster and easier digital experience, the bank said. On the back end, the partnership will allow HSBC to process and close loans more efficiently.
Here's what it means: Digitizing the mortgage lending process is key for incumbents to provide faster, easier, and more convenient experiences while also cutting costs.
- HSBC's new digital mortgage platform streamlines the loan application process for consumers. Through the partnership, Roostify integrates with the bank's loan origination system to increase the ease with which HSBC's lending team can transfer information and effectively communicate with customers. The bank's customers will now be able to submit loan requests online, share necessary documentation digitally, and track, in real time, the status of their application.
- Consumers are increasingly turning to digital channels for their mortgage needs.In the US, it's becoming increasingly common for consumers to complete at least some parts of their mortgage journey online, per Fiserv. For instance, 47% of consumers say they would be comfortable applying for a primary mortgage online. Given this consumer willingness to use digital channels, HSBC's partnership with Roostify can enable the bank to meet this demand. And such a partnership is especially beneficial because it can allow the bank to bring a digital solution to market without having to bear the complete developmental costs.
- In addition to meeting consumer demand, digital mortgage solutions enable financial institutions (FIs) to cut costs.Mortgage loan documents can be as long as 700 pages - and accurately validating these documents manually isn't only inefficient, it's also prone to errors. Digitizing the mortgage lending processes can enable FIs to sidestep these costs and allow them to redistribute resources toward improving their relationships with borrowers.
The bigger picture: Incumbents in the US have been overtaken by fintechs when it comes to mortgage originations - but partnerships with the likes of Roostify can help them claw back that ground.
- Incumbents' market share of mortgage originations has fallen sharply over the last eight years. In 2011, the top five US banks, including Wells Fargo and JPMorgan Chase, had a combined market share of 50%. However, this has fallen dramatically in recent years, with these players' share accounting for 21.1% in Q3 2018, per Trefis. In their place, fintechs have scooped up large parts of the market: Quicken Loans, the online-only lender, surpassed incumbents to become the No. 1 residential mortgage originator by volume at the end of 2017, for instance. In addition to HSBC, we've seen a number of incumbents begin to offer digital mortgage solutions to fight back and reclaim their share - a trend we expect to intensify.
- But offering online loan applications is only one part of the challenge.To truly keep up with the disruption in the space and push back against fintechs, incumbents need to lean on their existing competitive advantages, like physical branches. Delivering a compelling omnichannel experience, with strong digital capabilities but also the option for human interaction, can enable these players to differentiate and fight back against fintech insurgents. In this sense, while partnerships like HSBC and Roostify's enable established players to begin their digital journey, incumbents need to figure out how to couple this with their existing strengths to move the needle further.
Here's an industry opinion, as told to Business Insider Intelligence:
"Getting a mortgage is not just the biggest and most important financial transaction most of us will take, it's historically been a painfully opaque, cumbersome, and paper-heavy process. What we're witnessing is a revolution in the $15 trillion mortgage industry with legacy institutions leveraging fintech partners to digitize the mortgage-origination process, which saves consumers time, cuts costs, and reduces human error - all key ingredients of a great customer experience." - William Buell, head of partnerships Better.com
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