How Fintech is Changing the Mortgage Industry

September 8, 2020 Digital, NEO, Open Banking, Open Finance, Enterprise, Fintech AI/ML, Data-driven, FinTech and Alternative Finance, Fintech and Real Estate, Fintech International, Fintech Services, Innovation and Resources, Marketplace Lending/P2P, Online Lending, BNPL No comments

Guest Post | Sep 8, 2020

Fintech innovation - How Fintech is Changing the Mortgage Industry When it comes to changing the way we utilise financial services, fintech is beginning to significantly impact the mortgage industry. With new companies continuously redeveloping approaches to home buying, future homeowners are being provided with convenience, quality, and personalisation.

Using Tech to Address the Downsides of Buying a Home

As of right now, the housing sector continues to depend principally on the traditional mortgage market – for prospective homeowners, this is a complex and bloated process with significant room for growth.

Where in particular is there room for improvement? There are a number of answers, according to various fintech firms worldwide. Tic:Toc home loans is such an example, with the start-up aiming to offer 22-minute home loan applications through the use of digital technology that processes an application automatically, in real time.

For another point of difference, REALas is a digital platform that has highlighted the need for predictable and accurate property pricing. Their claim involves a proprietary algorithm that accurately speculates sale prices, with predictions averaging within 5.4% of the actual price.

See: Where are the Biggest Fintech Startup Hotspots Around the World?

With a different approach to the industry, Effi utilises AI in offering what they claim to be “the smartest mortgage broker platform ever built”. This focus on integrated efficiency, effectiveness and customisation aims to move the industry beyond traditional CRMs and lead management tools, automating and streamlining the mortgage broker job process.

A final example, Lucas, provides an innovative approach to addressing the problem consumers face when raising a deposit for a mortgage. Lucas has redefined the concept of the mortgage, facilitating home ownership through renting. The company purchases properties from real estate funds, before making them available to pre-vetted tenants who will initially contribute as little as five percent towards the property purchase price.

The Impact of Fintech Businesses Transforming Consumer Experiences

Given the extremely high value of property markets in any given country, online only fintech businesses are threatening a significant impact on banks and credit unions that have traditionally dominated the mortgage market.

Not only does fintech hold a remarkable percentage of refinanced loans (in the US, fintechs originate more refinanced loans than a combination of their 5 largest banks), but US market share of traditional lenders decreased by 22% from 2007 to 2014. Lower mortgage closing times, higher innovation and flexibility, and more targeted offerings are aspects and goals that traditional lenders will need to work towards in order to remain competitive, and many are doing so.

Big Bank Fintech Investment

It is clear that not only start-ups that are showing interest in fintech within the mortgage industry - when it comes to Canada, there is significant disruption within the financial services and mortgage sectors. Despite ranking a low 23 out of 27 countries in the market adoption of fintech, Canada is ahead of the US, France, and Japan. In particular, the Bank of Nova Scotia has developed ‘eHOME’, a tool that digitises the entire mortgage process in real time, allowing the elimination of contact with financial advisors and mortgage specialists.

Overseas, big banks such as Westpac in Australia are making significant investments. Both in the form of big commitments such as backing venture capital firm Reinventure, and in small features like their flexible mortgage calculator (click here to check it out), Westpac is making a point of demonstrating the feasibility of fintech services within the banking and mortgage industries.

US banks are also getting involved, with 24 equity deals to fintech’s in 2019. Some mortgage start-ups that have been backed by US banks include Built, Rabbet, and Trussle.

The Future of the Mortgage Industry

The commitment to innovation and fintech by a range of companies across the mortgage industry highlights the increasing role that technology is having in reshaping financial markets.

The various service offerings that are becoming available within the property market are continuing to shape business models, push new customer experiences, and scale companies more rapidly. Ultimately, the mortgage industry is in the process of exciting change – being a previously underdeveloped area within the financial sector, there is still much to look forward to when it comes to fintech and property.

NCFA Jan 2018 resize - How Fintech is Changing the Mortgage Industry The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org