Consumer banking has successfully responded to changing customer needs such as the desire to open and operate bank accounts without human intervention while balancing consumer experience with compliance and risk.

They have achieved this balance by using a combination of data and technology to on-board customers safely and effectively.

There is increasing impetus for us to do the same in mortgages.

Around 70% of banks allow customers to set up an account online, yet the level of digitisation plummets when it comes to mortgages.

Although automation rates are higher than pre-Covid levels,  lenders, on average, automate less than 30% of their mortgage decisions by using an automated valuation.

By adopting a digital-first property risk decisioning strategy, that level of automation could safely rise to 60% or more.

Digital-first in practice

To become fully automated, banks now rely on data to safely complete the credit risk checks necessary to vet users before they can open a bank account, such as KYC and AML, instead of asking a human to do it.

Email and phone number verification and data from credit agencies are all part of a bank’s digital tool kit.

Hand in hand with data comes the exploration of technology.

Information security, such as Optical Character Recognition (OCR), identity scanning and the use of One Time Passwords (OTP) to authenticate users, has helped banks to innovate and shake up legacy processes.

The final piece of the puzzle? Compliance. Banks have had to ensure that their new digital processes deliver the same level of customer care, responsible lending and credit risk management as their old ones to be given the green light by the regulator.

Driving automation in mortgages

So what does this look like in the mortgage sector?

Only a small number of lenders have adopted a digital-first strategy to assess property risk that takes their levels of automation beyond the industry average of around 30%.

Such strategies bring rich data into the mortgage process at the point when an application for a purchase or remortgage is received to transform property decisions with trusted data intelligence that can be shared with other parties within that journey.

Applications are triaged as standard to identify the cases that can be processed using a digital valuation.

And thanks to advancements in machine learning technology, the number of cases that can be safely assessed within a lender’s risk policy using an automated valuation has greatly increased.

With a digital-first strategy at the core of the mortgage journey, we see a clear path to a doubling of lenders’ automation rates to 60% and beyond.

Reasons to increase automation

Lenders spend on average £620 per application, including on those that fall through.

By triaging mortgage applications on day one, lenders can select the most efficient method of valuation for a case. If an automated valuation is suitable, lenders can identify risk much earlier in the journey which reduces wasted processing costs.

On successful applications, Hometrack estimates a cost saving of around 60% by not conducting physical valuation unnecessarily.

For the borrower, the increased speed of decision-making and improved levels of certainty at the start of the journey that their case will proceed delivers a far better experience than finding out about risks that could derail the application further down the line.

Sarah Guha is director of product at Hometrack