Trapped in tradition, the mortgage industry has long relied on a classic combination of manual document verification and credit reference agency scores to verify applicant income.
While the former is time and cost intensive and the latter can only automate around 20% of cases; when combined these have generally allowed the industry to successfully process applications across the country.
But, over the last two years, against a backdrop of Covid and home working, the practicality of this approach has been tested and found wanting.
A huge influx in applications caused by lockdowns and a pandemic-led reassessment of where and how we want to live, ultimately highlighted an issue that was always there; the lending process needs to be effectively digitised.
As it stands, excellent and necessary progress has been made on improving the lender and broker journey, but without many improvements being made to how each case itself is processed. To borrow a well-trodden analogy; it’s much like supermarkets pulling customers in through attractive online shopping experiences, but fulfilling orders by manually picking items from the shelves.
As digital continuity became a board-level risk item, this challenge has been recognised across the lender market, with business leaders prioritising projects to get their digital systems up to scratch. Implementing solutions that will ease the enormous strain on their systems, ensure a high level of accuracy and enable human operators to focus on only the most complex cases that require their input has become key.
Emerging, in the form of intelligent automated income verification (AIV) or intelligent automated income verification, these capabilities future-proof against further challenges similar to those we have collectively faced in the last 20 months – while also considerably reducing cost and time for all parties.
By using the technology available to us, we can effectively take the significant human resource that is ploughed into the majority of cases and make use of it elsewhere. Take our Credit Risk Hub, for example. This recently launched solution allows us to automate around 60% of applications without the need for any intervention on the part of underwriters.
But the benefits don’t solely apply 60% of the time. Intelligent automation can also significantly reduce processing on the remaining 40%; only requiring a human eye on the case to check a specific document entry that is illegible, unclear or may (for example) indicate fraud.
In real time, these efficiencies combine to reduce a process that can take around three quarters of an hour to just three minutes. Put another way, an applicant can often expect to receive an answer before the end of a phone call with their broker.
The nature of technology is that we constantly look to improve upon it – make it more efficient, require less energy, or ensure a greater degree of accuracy – and this is certainly true of intelligent AIV.
Built with machine learning at its heart, the software will learn the intricacies of the various income verification documents with the more cases it processes; driving up the number of documents it can process entirely on its own as it is used and delivering more accurate, consistent journeys.
All of this means that there is only one direction of travel for intelligent AIV – up. Equally important, not only does it have the ability to continually improve the verification process, but it can also embrace other innovations within the industry, such as open banking; absorbing pure digital information channels into a hybrid solution that services all forms of current and future customer engagement.
Yet, to realise these opportunities, we need to champion change. The notion of upgrading to digital practices has been around the mortgage market for years, yet we are still relying too heavily on human eyeballs to verify an applicant’s income. As the last two years have shown us, this is simply not practicable or sustainable.
We already have the technology at our fingertips to significantly reduce the burden on underwriters, while allowing customers to experience a fully digital, more consistent, cheaper and faster journey.
In a modern market where everyone concerned is looking for a faster time to yes, surely an approach that drives efficiency and consistency, while reducing cost, is something to be welcomed?
George Robbins, VP of commercial, Hometrack
