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<div>Q&A: Understanding the potential and limits of automation</div>

Q&A: Understanding the potential and limits of automation

Bluestone Mortgages sales and marketing director Reece Beddall talks to David Burrows about the challenges and opportunities automation presents for both brokers and lenders.

In the specialist lending market, what progress is being made on the automation journey?

We’ve seen significant progress in the specialist sector in recent years. One key development driving this progress has been the implementation of Open Banking which is already revolutionising the mortgage application process.

By securely sharing financial data between banks and third parties, Open Banking streamlines the application journey, resulting in faster outcomes. This has resulted in us being able to halve our application to offer time from 17 days to just 8 days.

Open Banking also enables lenders to gain a granular understanding of a customer’s financial circumstances, improving financial inclusion for customers with complex credit. This technology benefits both consumers and brokers, eliminating paperwork, improving risk assessment, and facilitating better lending decisions.

What resistance or wariness is there amongst brokers and lenders to embrace automation?

Despite increased willingness to embrace automation post-pandemic through the use of AVMs, we’re still seeing some resistance to Open Banking.

Going down the Open Banking route can often seem like extra work, especially if a broker already has the bank statements on file from the initial fact finds. However, bank statements can become a challenge when brokers are submitting cases to specialist lenders because in many instances the bank statements asked for during the initial fact find become out of date by the time they get to the specialist lender.

To overcome this, it will be beneficial to provide data on clients using Open Banking, rather than relying solely on bank statements. The ability to compare application-to-offer time frames using Open Banking versus traditional methods will play a key role in driving this behaviour.

What are the challenges and opportunities for brokers and lenders alike?

The main challenge lies in raising awareness and educating stakeholders about the benefits and potential of Open Banking. Technical implementation poses another challenge, with considerations like system compatibility, data security, and privacy. However, Open Banking will only become widely adopted in the mortgage market if we all work collaboratively to improve awareness and understanding of its full potential.

Despite this, we are also seeing more and more brokers and lenders reap the benefits that automation can provide. At Bluestone, we firmly believe that one of the greatest opportunities of Open Banking is its ability to improve financial inclusion for disfranchised customers, those with complex credit or income streams.

Where to from here?

It’s important to use automation as an enabler rather than expecting every application to undergo a fully automated journey. Factors such as clients’ income stream or property type may restrict  complete automation. Nevertheless, automation can not only make the end-to-end journey process more efficient but is also a secure and safe way to share data between entities.

If lenders want to bring out brand new platforms to try and cover all eventualities, is this costly, since within a year they are out of date? 

Yes, lenders looking to bring out new platforms to cover off all eventualities may face higher costs as they will become outdated over time. Instead, what we are seeing is a growing trend of lenders looking to adjust their existing platforms. Whilst more cost effective, the downside is that this can tend to result in them becoming clunkier and harder to navigate. Looking ahead, platform evolution should be a key priority for lenders, allowing them to update criteria and accommodate product development. Lenders that get this right will likely see greater success and customer satisfaction.

You conducted a pilot with Experian in 2018 for open banking – what were the conclusions? How did this help inform the launch of your digital platform Bluesky?

Our Open Banking pilot was a vital step in our tech transformation journey and helped pave the way for Bluesky. Not only did it help promote our Open Banking service to customers but gathered crucial feedback for ongoing improvement.

Since then, we’ve evolved our platform to create a new affordability wallet that provides enhanced security and accurate data for verifying customers’ expenditures in minutes. Such benefits have enabled us to streamline the mortgage process and radically reduce decision times and ultimately improve customer outcomes.

What impact did Covid have on the move towards automation?

The pandemic played a significant role in the acceleration towards automation for both lenders and brokers. With limited face-to-face interactions over Covid, lenders increasingly relied on adopting e-signatures and automated valuation models (AVMs) to advance automation. Brokers now have a larger online client base, making it more common for them to utilise automation features like Open Banking.

AI (artificial intelligence) is something that the industry is increasingly aware of. What might the security issues be here?

In the specialist lending space, relying solely on AI for underwriting wouldn’t, and shouldn’t, be plausible as it could pose threats, such as fake bank statements and payslips. Due to the applications we receive being more complex and nuanced, we look to a more holistic approach and believe that a strong underwriting team is necessary to address the complexity of our customers’ cases, and help provide a more human outcome to the decision.

What’s next on Bluestone’s automation journey?

Over the next year, our main focus will be driving efficiencies in the mortgage application process to enhance the overall experience for both brokers and end-customers. We plan on rolling out another phase to our Bluesky platform, which will include several more automations to deliver on this, as well as verifying income via automation to significantly speed up the end-to-end mortgage process.

The post Q&A: Understanding the potential and limits of automation appeared first on Mortgage Strategy.

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