'Fintech' - Is this the answer for home lending?
Updated: Jul 5, 2018
Yes buying a home is still one of the biggest decisions we make as individuals , although another investment for younger generations in today's western world is that of regular travel home and abroad. For those still looking to go through the home purchase experience, rapidly evolving financial technology has added a new dimension to the process. Customers of home lenders , whoever they may be, have a choice to seek finance 'online' and via smart phones, with the hope that the loan approval and home purchase process will be faster, more efficient, less stressful, and in general, lead to better overall outcomes for them.
The first question we might ask is what level of 'complexity' are we dealing with in looking at this combination of product and service referred to as 'home lending'? A further question would then be, can it be compared to say any online retail product or service purchase? Yes it's true that many consumers already shop online for insurances which are a financial services sector product. However, they are not obviously as high end value as a 'home loan'. Here are some points highlighting the complexities of this process, which will hopefully also raise thoughts on surrounding issues regarding the use of financial technology for the delivery of the 'home loan' service.:-
* A customer knows their needs and objectives but can they identify a suitable product for themselves with all the myriad of options available? What level of industry knowledge is required to navigate this?
* Who is the customer borrowing money from and does this really matter?
* There are potentially eight different parties and /or stakeholders involved in the process , including solicitors / conveyancing , customers , lenders, real estate agents, brokers etc . Who co-ordinates all these parties and what happens when a 'communication breakdown' , as I would say 'a Roy Orbison moment' occurs?
* How is credit now assessed for individuals and do we know the positive and negative characteristics of this? If technology weakens the credit assessment criteria is this a good outcome for borrowers?
* Can online financial service platforms be developed sufficiently to fully understand the client they are dealing with, given the individualism of customers and their circumstances defies a 'one size fits all' model?
* Should we accept that we are dealing with a complicated product / service in 'home lending' and treat it with value?
The list of questions around the implementation of financial technology is inexhaustible but the aim of this article is to simply question whether 'Fintech' can indeed deliver better outcomes for consumers? Some might argue that accuracy and quality could be potentially sacrificed for the element of speed, and with such a complicated service as 'home lending' and wider macro economic implications, that carries increased risk. A comparison could be made with the emergence of the 24/7 news cycle that has eroded solid factual journalism . The need for speed and the pursuit of customers in the media industry has had a negative impact on the critical importance of quality journalism and how it helps promote good outcomes for the society through time taken for measured analysis and critical debate. Fintech could have the same impact on the home lending process?