Dock9 recently hosted a roundtable at the Gherkin with thought-leaders in the sector exploring whether 2020 will finally be the year the mortgage industry catches up with others in adoption of APIs.
Our MD, Mark Lusted, moderated the discussion and was joined by participants from Accord Mortgages (Nicola Alvarez), Foundation Home Loans (Jeff Knight), Ladder Mortgages (Vince Sammon), LSL (David Copeland), Mortgage Brain (Neil Wyatt), IRESS (Steve
Carruthers),Twenty7Tec (Phil Bailey), Eligible (Rameez Zafar), the BSA (Robert Thickett), Knowledgebank (Nicola Firth) and Paul Hunt to explore these questions.
Most now agree that APIs create significant opportunities to improve many parts of the mortgage process by increasing speed and operational efficiency whilst improving the experience for customers, brokers and lenders alike.
However, the mortgage industry is lagging far behind in the use of APIs in comparison to other financial sectors. In many cases, in each of the key milestones of the mortgage process, information is manually re-keyed between systems, leading to inefficiency
and poor data quality. Many core platforms in the industry still don’t have API capabilities and simultaneously many companies have multiple legacy systems to contend with. For lenders under increasing competitive pressure to open up, this has
presented particular challenges and is arguably a key reason for the relative lack of adoption of APIs to date.
But momentum for change is building and at Dock9 we believe 2020 could finally be the year of the mortgage API, and those that don’t embrace the technology shift will start to be left behind. A lively discussion followed, and a short summary of
some of the themes we explored is detailed below.
Waiting for the “big six” to adopt
While some specialist lenders have been at the forefront of opening up and integrating industry initiatives to submit DIP and application data from CRMs to lenders through APIs (such as Twenty7Tec’s Mortgage Apply, IRESS Lender Connect, Mortgage
Brain Lendex and One Mortgage System as examples), from a brokers’ perspective, until the “big six” have adopted this technology, it really isn’t going to make a substantial difference to their workload, or gain real traction
in the marketplace. One participant commented that the “apathy” among many brokers when it comes to new technology means that a critical mass of lenders need to be onboard to make a really compelling case for adoption.
So why are many of the largest lenders lagging behind? Some thought that the primary reason was that many lenders don’t own their own core platforms, and therefore aren’t in complete control of their own destiny.
Incumbent core system vendors have been slow to adapt to the new world of open APIs. But more fundamentally the question of short-term ROI is holding many back, which we explore further below.
Will APIs drive new business?
The cost of re-platforming, or working around existing legacy systems, is naturally weighed up against the the potential APIs offer to drive more profitability (through additional volume, increased efficiency, or both).
The question that is being asked around board tables is “if we don’t spend this money this year, would we still get the same business in?” Is this going to materially reduce my operational costs?”
Coupled with the perceived apathy among brokers when it comes to new technology, many are taking a “wait and see” approach.
But is this short-term outlook going to store up problems for some lenders when the floodgates do open, the tipping point is reached and they are potentially left behind? Should they be taking a more strategic medium to long-term view?
Internal vs External APIs
One participant highlighted that the majority of lenders had in fact been busy developing Internal (Private) APIs in the background and re-engineering their platforms ready to offer External (Public) APIs in the coming year.
APIs open more risk of bypassing brokers
One of the main drivers behind this work for many lenders has actually been focussed on enabling interaction directly with consumers, therefore bypassing the broker, including deepening their partnerships with comparison websites.
Additionally, lenders have focussed their IT development on Product Transfers, with the increasing success of these showing that customers do in fact value the convenience and simplicity of these digital experiences.
Whilst direct-to-consumer channels have faltered in the past relative to broker-driven business, is the new low-margin environment going to force lenders to move harder in this direction in the coming years? As more friction is removed in the mortgage
process, could this challenge the normalisation of broker fees?
Practical use of APIs
Beyond the industry getting the basics of electronic passing of case data right, APIs open up a world of possibilities for more radically speeding up and improvements in the user journey. Some of the obvious include using Open Banking APIs to remove the
need for paper bank statements, using Automated Valuation APIs early in the mortgage decision making process, reducing wasted time on cases that fail later in the process for valuation reasons and using Property Data Enrichment APIs to automatically
pre-fill rich data about a property that could be used for more intelligent lending decisions (which will arguably become increasingly important in an era of “Modern Methods of Construction”).
But perhaps one of the most promising innovations is Digital Identity, which paradoxically also highlights that the barriers to adoption are often not technical but rather regulatory.
Digital identification APIs could also remove the need for certified paper-based copies of passports and driving licenses and take fraud-detection to the next level. In an ideal world, the customer would prove their identity once in the lifecycle of a
mortgage, at their first interaction (either with a lender or broker), and that identity check could be shared amongst others further down the process.
However whilst the technology foundation is already in place and has a low cost of technical adoption (and is in widespread use by challenger banks and other fintech startups), there is no one standard of Digital ID (either through a technology standard
or group of companies). Until there is, brokers, lenders and conveyancers will have to continue to undertake their own ID checks to meet their regulatory requirements.
Going back to basics
Whilst the discussion explored how other APIs that could more radically transform the user experience, it ended on the theme of getting the basics right first.
Simple things like a standardised address format between CRMs and other systems could have a major impact on efficiency and accuracy of data which causes problems for those further down the process. Postcode Lookup APIs have existed for decades, but still
in some broker firms addresses are manually typed in, sometimes off of handwritten notes. These APIs could also be used to cleanse existing databases of property data, something that most agreed would have a positive impact on the efficiency of the
process and is probably a good place to start.
Thanks to all that took part in the discussion, at Dock9 we’ll certainly be pushing for the use of APIs within our network and with our clients and hope that 2020 will finally see the momentum building in the sector.
Some pictures from the morning are below.