The Path Ahead for Mortgage Digitisation - Cognizant
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COGNIZANT 20-20 INSIGHTS
The Path Ahead Executive Summary
Within the next five years, digital sales have the
potential to account for 40%-plus of new inflow
for Mortgage revenue in the most progressive geographies
and customer segments. By 2018, banks in
Digitisation
Scandinavia, the United Kingdom, and Western
Europe are forecast to have half or more of new
inflow revenue in most products coming from
digital sales.
Digitisation is set to transform Digitisation looks set to change the business as
much as the recent regulatory reforms did. It can
the mortgage industry by potentially address all of the major challenges
addressing issues ranging from that mortgage executives face, such as regu-
customer experience, asset latory compliance, customer experience, asset
quality and risk, efficiency and cost containment.
quality and risk, and regulatory
Organisations that do not formulate a compre-
compliance to efficiency and hensive digital strategy risk losing business to
cost containment. Lenders must competitors.
forge a path to digitisation or risk This paper provides a technology-focused,
becoming irrelevant. detailed path for mortgage digitisation. It ad-
dresses current challenges, as well as the
enabling technology needed to seize and solve
emerging opportunities.
Cognizant 20-20 Insights | September 2018
Cognizant 20-20 Insights
Digitisation allows lenders to further
automate compliance processes and
remove manual interference. For instance,
enhanced digitisation of the MMR, MCOB
and MCD reporting processes will more
effectively automate the review, leading
to lower error rates with fewer resources.
HOW DIGITISATION CAN How a company delivers on its experience
BENEFIT MORTGAGE LENDERS is becoming more important than what it
delivers. According to the Walker study, ‘Cus-
Mortgage lenders face a variety of challenges tomers 2020: A Progress Report’, customer
(see below). A fully digitised mortgage process experience will overtake product and pric-
can help to resolve some of these challenges by ing as a key brand differentiator1. A focus
providing significant value across the spectrum of on customer experience improves customer
lender goals, risks and needs. Each organisation satisfaction, customer retention, brand value
will require a tailored approach based upon the and, ultimately, sales. Within mortgage lend-
enterprise’s level of digital maturity. A thorough ing, significant improvements are possible
digital assessment will focus on all dimensions in moving customers to digital channels and
of value across regulatory compliance, customer enabling more self-service options (mobile,
experience, asset quality and efficiency. web, etc.). The mortgage market primarily
leverages a phone-centric engagement model
• Regulatory compliance: Regulators are
that forces customers to speak to mortgage
monitoring almost every aspect of mortgage
advisors to initiate almost all the required
acquisition and servicing. Mortgage lenders
or meaningful lending activities. While this
have no choice but to be compliant not just
engagement channel may be ideal for some
because of huge penalties but also due to
consumers, a growing population of consum-
reputation risk. The recent compliance guide-
ers is looking for more self-service options
lines include Mortgage Conduct of Business
that do not require telephone interactions.
(MCOB), Mortgage Market Review (MMR2) and
European Mortgage Credit Directive (MCD). The Global Contact Centre’s 2016 bench-
marking report highlights this point: ’For
»» The case for digitisation: Digitisation
customers aged 55 and older, the telephone
allows lenders to further automate com-
is the predominant channel of choice for
pliance processes and remove manual
upwards of 87.0%. However, that number falls
interference. For instance, enhanced
quite dramatically to just 51.7% for custom-
digitisation of the MMR, MCOB and MCD
ers aged 35–54 years. It will soon become a
reporting processes will more effectively
minority, as this group too follows the younger
automate the review, leading to lower
age groupings in preferring the immedi-
error rates with fewer resources.
acy and convenience of digital channels to
• Customer experience: Competing only on traditional phone services.’
products and services is no longer enough.
The Path Ahead for Mortgage Digitisation | 2
Cognizant 20-20 Insights
Digitisation allows for an individualised
customer-focused experience, with
improved engagement that is often
expected but rarely delivered when
shopping for personal financial services
products such as mortgages.
»» The case for digitisation: Digitisation We are seeing great steps in this direction
allows for an individualised customer- with the recent announcements from the
focused experience, with improved UK government through Competition and
engagement that is often expected Market Authority (CMA), which aims to
but rarely delivered when shopping for push open banking to put more control in
personal financial services products customers’ hands.
such as mortgages. In addition, younger
generations often prefer digital technol- • Intermediary relationship: Intermediary
ogy as a self-service tool to meet their businesses have invested in digital capabil-
needs. The self-service experience will ities to further improve customer journeys
need to quickly move away from a laun- and internal operational efficiency. With
dry list approach for the customer to over two-thirds of UK mortgages originating
fulfill documentation needs and move to from intermediaries, lenders have continued
a more collaborative and engaging model to improve the way they interact with these
where information will be exchanged and businesses. For example, online decisions in
shared rather than simply supplied by principle, case tracking and scan and attach
the consumer. The direct sourcing of sup- document upload are now standard2. Inter-
porting documentation will become the mediaries and lenders alike plan to continue
new normal for first attempts at securing improving their ability to share information
essential information. digitally.
Additionally, the actors within the process »» The case for digitisation: There is a
should become active participants in seg- greater emphasis on customer retention
ments of the transaction rather than all by maintaining customer relationships
information being requested and sourced after completion. Intermediaries’ ideal
solely through the borrower alone. Partic- interaction with a lender would be the
ipation of estate agents, home insurance path of least resistance, where they can
providers, valuators and other players will obtain the best and quickest decision
become more collaborative and instan- for their customer. Digital mortgage will
taneous. Moving from phone and email have to have a positive impact on lender-
collaboration to other means enables to-intermediary interaction. For that
more controlled and clear communica- investment in digital, changes will be
tion and cooperation. The primary focus needed, including making the process
should be to minimise the impact on the easier, automating the exchange of data
customer without sacrificing loan quality (enabled by technologies like applica-
and compliance. tion programming interfaces [APIs] and
The Path Ahead for Mortgage Digitisation | 3
Cognizant 20-20 Insights
Digital mortgage will have to have a positive
impact on lender-to-intermediary interaction.
For that investment in digital, changes will be
needed, including making the process easier,
automating the exchange of data … and further
improving transparency around case progression,
information requests and decisions.
robotic process automation) and further • Efficiency and cost: Due to increased regula-
improving transparency around case tory oversight, cost-to-income ratios rose by
progression, information requests and 1%, reaching an average of 64%, indicating
decisions. banks were struggling to significantly reduce
costs, despite austerity measures3. This sub-
• Asset quality and risk: In the shadows of the stantial rise in costs is due to the reliance
mortgage crisis that caused tens of billions of on people to perform most of the functions
dollars in losses for investors, little has been within the process. Furthermore, due to the
done to improve asset quality. Traditional pro- higher error rate of manual processes, lenders
cesses, controls and loan origination system are forced to insert double and triple reviews
(LOS) platforms that were in effect prior within the process. This process is both costly
to the crisis are still in place with limited and time-consuming, and creates uncertainty
improvements. A deeper level of accuracy, for the customer.
trust, integration and transparency is required
in the lending market to minimise the risk of »» The case for digitisation: Back-office
reoccurrence of massive default rates. improvements can only come from chang-
ing the way the process is managed. It
»» The case for digitisation: A fully digitised requires moving away from people-based
mortgage process allows for expanded processes to digital processes and expand-
automation of underwriting, processing, ing the data model to not simply facilitate
closing and funding. For instance, within key aggregate values, but to collect and
processing, open banking data may be process the metadata that drives the
leveraged to auto-calculate income ratios process decisions. Once the processes
and cross reference with HMRC data. The are elevated to this level, true automa-
same can be applied to almost all verifi- tion and exception management can be
cation points within the process (asset realised that not only reduces processing
verification, collateral valuation, credit times and costs, but also creates a much
review, etc.). Benefits realised include more engaging and predictive customer
improvements in processing timeframes experience. The improvements realised
and better use of processing and under- through digitisation and the benefits in
writing resources. With fewer defects, compliance, customer experience, asset
asset quality will improve. quality and efficiencies lead to a more
streamlined and less expensive mortgage
The Path Ahead for Mortgage Digitisation | 4
Cognizant 20-20 Insights
The improvements realised through
digitisation and the benefits in
compliance, customer experience,
asset quality and efficiencies lead to
a more streamlined and less
expensive mortgage process.
process. In the prior example of how digiti- • Enable a greater use of data, and share data
sation of income calculation can enhance with the customer.
processing through increased automation,
• Ensure that customers get the best avail-
the improvements noted will likely con- able choice.
tribute to a decrease in turnaround times
and an increased speed to close the loan. • Provide better transparency and faster
In addition, cost savings may be further decisions.
enhanced through a rebalancing of pro-
So how does a bank make this transition? In
cessing staff.
order to bring the industry into the digital future
state, an understanding of the current state is a
WHAT CUSTOMERS WANT requisite. The gaps will quickly be identified and
Looking to the future, customers want a variety an approach to digitise the process for mortgage
of things from their mortgage process. One clear lenders and servicers can be developed.
need is for a choice of interaction methods: two Current Capabilities of Leading Lenders
in five customers want to interact over a blend of
The borrower engagement approach of today’s
physical and digital channels4.
leading lenders is disparate and not truly ’digital’.
The challenge before mortgage lenders and In the UK mortgage market, intermediaries still
servicers is to bridge the gap between current control 62% of market share5.
systems and platforms and the ease of use of
Customers are able to initiate the loan applica-
customer-centric systems and features that are
tion process with intermediaries or the bank’s
already the norm in other industries. Consumers
online point of sale (POS) platform or interface
can now download a movie to their phone, unlock
but, in most cases, the document collection and
their house with their phone and order food
additional borrower information is obtained via
and clothing online without ever dealing with a
other channels: call contact, email, portal con-
cashier or customer sales/service representative.
nections, etc. The mortgage banking industry will
The same can be provided to the mortgage need to invest in digital offerings and technolo-
buyers: gies to improve the loan origination process and
the customer experience.
• Make the journey as easy as possible.
• Provide an opti-channel to engage customers
through the journey.
The Path Ahead for Mortgage Digitisation | 5
Cognizant 20-20 Insights
Characteristics of Mortgage Digitisation
Process/ Deep Insights
Technology Into Customer
Transformation Needs
MORTGAGE
Business
DIGITISATION
Innovative
Model Products and
Disruption Services
Personalised
and Stellar
Experience
Figure 1
WHAT IS MORTGAGE redesign of products and services based on
DIGITISATION? customer research, segmentation and anal-
ysis. For example, create an intermediary
The best way to describe mortgage digitisation is portal to automate support customers.
to understand its characteristics, as follows:
• Personalised and stellar experience: Digiti-
• Processes/tech transformation: Digitisa- sation provides a consistent, convenient and
tion helps transform non-customer-facing synchronous customer experience through all
processes for efficiency and effectiveness. channels of interaction and across all devices.
It also facilitates transformation of technol- For example, target the right products to
ogy related to the customer experience. improve asset quality.
For example, reduce cost of operations by
digitising processes related to regulatory • Business model disruption and innova-
compliance. (To learn more, read ’Embracing tion: Digitisation is a business disrupter that
Digital Convergence amid Regulatory-Driven is prompting lenders to adopt new business
Overhauls’.) models, digital products, pricing and pack-
aging to meet customer needs. For example,
• Deep insights into customer needs: Digiti- create a marketplace to leverage open bank-
sation allows banks to more effectively target ing, third-party suppliers and fintechs.
their customers with relevant and thought-
ful services at the appropriate moment. For Banks that are successful in meeting these digital
example, leverage the opportunity that open characteristics will emerge as industry leaders or
banking presents to enhance the customer at a minimum remain relevant in the mortgage
experience. industry. Organisations that are unwilling to
embrace these changes risk potential failure in
• Innovative products and services: Inherent the mortgage market.
in digitisation is innovation, which supports a
The Path Ahead for Mortgage Digitisation | 6Cognizant 20-20 Insights
Digital Mortgage Maturity Curve • Experience design: Designing a stellar cus-
tomer experience across all channels is a key
An organisation that fully embraces digital
element of success. A focus on the customer
processes will demonstrate maturity in its pro-
experience will allow for differentiation from
gramme capabilities and execution. Successful
competitors.
organisations will deploy a customer-centric
model that allows for flexibility when customer Execution
behaviours and expectations change (e.g., how
• Team structure and skills: At the peak of the
and when to be engaged, enhancements in per-
digital mortgage maturity curve, the organi-
sonal technology [e.g., mobile phones, tablets],
sation will maintain team structures with a
multichannel preferences, etc.).
complementary mix of skills and defined roles
Leaders in the area are characterised by quali- to execute on projects.
ties such as team structuring, customer journey • Customer segmentation: Digitisation equips
maps, project management experience, and lenders with the tools to gain a deeper under-
capabilities such as organisation agility, pro- standing of the customer and their needs
cess innovation, and sophisticated design and and wants.
technology architecture. Below is a list of traits,
• Customer journey maps: Customer needs
segmented by programme capabilities and exe-
are supported through a deeper understand-
cution, displayed by successful organisations
ing of their preferred interactions via the
with mature digital mortgage strategies.
development of journey maps.
Capabilities • Multichannel approach: Multiple modes of
• Organisational agility: Organisations with communication (e.g., text message, email,
a nimble operating model and agile meth- etc.) allow customers the flexibility to use fea-
odologies will be better equipped with the tures how/when/where they want.
flexibility to adapt their digital strategies as
• Customer offer and service orchestration:
programmes, customer behaviours and tech- Personalisation is further advanced by pro-
nologies change. viding borrowers with the capabilities for
• Process digitisation/innovation: The pro- mass customisation.
gression towards a fully digitised mortgage
process requires a fresh perspective obtained • Project execution: Programme management
and governance that thrive on digitisation
via process reengineering in order to simplify
will be able to deliver long-term sustain-
and redefine convenience.
ability and demonstrate an understanding
• Technology and architecture: A flexible, of technology-enabled business change.
agile, contemporary architecture/framework
is required for complete digitisation. Although the capabilities and execution traits
listed above are the foundations for success, the
• Data and analytics: Data and analytical
industry is still evolving and the customer seg-
capabilities that predict and meet needs are
mentation journey is not yet mature.
essential for adjusting digitisation strategies
in real time.
The Path Ahead for Mortgage Digitisation | 7Cognizant 20-20 Insights
The Path to Customer Delight
STAGE 4:
Competitive
Leadership
Customer Delight:
• Dedicated team with complementary skills
Personalised Customer Experience: across design, delivery and execution.
STAGE 3:
• Experienced team with complementary skills • Advanced segmentation (demo, income,
across design, delivery and execution. Competitive community, affinity, location, transactional
• Advanced segmentation (demo, income, Advantage behaviour, fatigue, nonbanking profiles).
community, location, transactional behaviour, • Central view of profiles, personas and segments,
nonbanking profiles). and content for customer journeys.
• View of profiles, personas and segments, and • Service-offer orchestration based on consumer
content for customer journeys. preferences and habits.
• Some service-offer orchestration based on • Dedicated, specialised process digitisation team.
consumer preferences and habits. • Real-time integrated analytics for service
• Dedicated, specialised process digitisation team. orchestration for mass personalisation.
• Integrated analytics for service orchestration for • Expert experience design team integrated with
mass personalisation. tech delivery.
• Expert design team integrated with tech delivery.
Desirable Customer Experience:
May Create Functional/Useful Solution: • Team with some digital skills for design and
• Basic team in place with typical software experience. execution.
• Anecdotal customer journey maps and segmentation. • Enhanced segmentation (demo, income, location,
transactional behaviour).
• Basic multichannel approach.
• Anecdotal customer journey maps/segmentation.
• No offer and service orchestration.
STAGE 2: • Basic multichannel approach with channel/
• No dedicated team for process reengineering.
Competitive feature view.
• No setup for data and analytics.
Parity • No offer and service orchestration.
• No specialised team for experience design.
• Process reengineering/digitisation done by the
same business team.
• Basic data and analytics infrastructure setup
but no dedicated team.
STAGE 1: • Basic experience design team.
Competitive
Lag
Figure 2
The Path Ahead for Mortgage Digitisation | 8Cognizant 20-20 Insights
As depicted in Figure 2 (previous page), the THE JOURNEY FROM
four-part path to customer delight leads the TRADITIONAL TO DIGITAL
borrower towards a fully personalised customer
experience. The first stage is competitive lag, The journey from a traditional mortgage model
in which the organisation maintains the most to a digital model cannot have a short-term
basic digital processes with no or very limited focus that capitalises on quick wins. It goes
resources (e.g., dedicated process engineering well beyond the use of new tools and differ-
team) focused on the customer experience. ent media for engagement, and it is a holistic
change in the mindset of the organisation and
Competitive parity, the second stage, is reached the ultimate delivery of products and services.
once the organisation incorporates the use Lenders that implement ’digital‘ utilities and
of customer journey mapping with enhanced applications should question their longer-term
segmentation (e.g., by demographics, income, objectives in doing so. When mobile applications
location, transactional behaviour, etc.) to its are introduced, there should be improved brand
workflow across the delivery and servicing of the awareness and credibility. However, the organi-
mortgage product. sation should consider implications beyond just
the brand. Lenders should ask whether they are
The next stage, competitive advantage, is char- really transforming the way they engage with the
acterised by an increased focus on the customer customer, changing the way they do business or
experience, with advanced segmentation, and changing the value of their offerings. In many
more personalised customer journey maps, with instances, digital tools are applied to particular
a significant emphasis on connecting with cus- experiences and are not a universal strategy of
tomers and improving the customer experience engagement and doing business in the future.
at all stages of the product lifecycle — origination,
closing, servicing, asset disposition, etc. To better understand what we mean by having a
digital mindset, let’s look at the traditional tech-
At the peak of the maturity curve is competitive nology model and how it contrasts in value with a
leadership. Organisations at this level are charac- more digital model.
terised by dedicated teams with complementary
skills across design, delivery and excellence. The Overview of Traditional Model
most advanced customer segmentation is main- The technology framework that currently exists
tained, with profiles that include both financial for many lenders today has been achieved
and nonfinancial customer data not typically through years of acquisition and integration
captured in today’s standard systems, along of utilities, components and systems. It is typi-
with a centralised view of profiles, personas and cally driven by mandated changes: new industry
segments, and content for customer journeys. offerings, new regulatory requirements and
At this level, the service offerings’ composition new investor requirements, which are quickly
considers customer preferences and habits and designed and implemented. The organisation
real-time integrated analytics for mass personali- reactively responds to these changes rather than
sation. An experienced design team integrated in taking a proactive approach and implementing
the technology delivery of the product and ser- long-term sustainable solutions that differentiate
vice is evident. the organisation through thoughtful customer
offerings.
The Path Ahead for Mortgage Digitisation | 9Cognizant 20-20 Insights
Technology has not kept pace with the value
demand in the mortgage industry, which
continues to squeeze profits and cause
operational heartburn.
Traditional vs. Digital Solution Model
Traditional Solution Model Digital Solution Model
Intermediary Borrower Rules Management
POS Apps Telephony Orchestration
Portal Interaction
Artificial Intelligence
Workflow
Machine Learning
Document Digital
Reporting
LOS Storage Back Office
Data and
Business Intelligence
Document
(BI) and Analytics
Vendor Closing Doc Conveyance Third-Party Management
Interfaces Solutions & Closing Interaction
Illustrative — not all inclusive of all typical utilities leveraged
Figure 3
Take, for example, the implementation of MMR ability to respond to future needs. Additionally,
in 2014. Banks, in an attempt to reduce opera- many lenders’ business models result in a dis-
tion overhead, relied heavily on intermediaries jointed customer experience based upon the
to bring in the mortgage business. The inherent mode of customer interaction. Consider the loan
inability to support the intermediaries’ business underwriting document collection process. Bor-
with a high degree of automation came to the rowers, lenders and closing agents go through
fore as volume peaked and customers’ expecta- fragmented channels whether it is phone, email
tion changed. Since then, various lenders have or jumping to various ’tools‘ to participate and
been investing in ways to upgrade their infra- collaborate. Rarely does the customer have a
structure to support an intermediaries-based seamless experience. Most often, the customer
business model. The traditional model has grown is forced to engage with the lender through call
from necessity or from being reactive to market centres or email to collaborate and participate in
demands, rather than looking at future business the process.
needs, customer needs, offerings, competitive
Why Isn’t Technology Keeping Pace with
advantages and market differentiation.
the Value Demand?
The current technology framework for many Technology has not kept pace with the value
mortgage lenders is a collection of utilities, demand in the mortgage industry, which con-
applications, components and systems that tinues to squeeze profits and cause operational
have been strung together to solve specific heartburn. We have observed the following root
needs throughout the process. Such a model causes in the industry that are contributing to
often lacks extensibility into new ways of doing this disconnect between technology and value:
business, lacks capability reuse and limits the
The Path Ahead for Mortgage Digitisation | 10Cognizant 20-20 Insights
Asking for documents again and again
through a slick self-service interface is
not improving the experience; rather, it
just puts a new face on a problem that
has persisted for years.
• There is too much reliance upon a single • Fragmented ‘point solutions’ are leveraged
LOS to address all of the needs within the throughout the process, which impacts
lifecycle. LOS have been occupied with com- the customer experience. Examples of
pliance changes for the past decade and have fragmented solutions are often found in the
not focused sufficiently on innovation. following: solicitor portals, valuation portals
and intermediary portals.
• Traditional operating models have largely
not been questioned. Many lenders oper- • The immediate focus for lenders tends to be
ate within a linear process and align their on the customer experience and self-service
organisations around sales channels and options. Such a focus is great for improved
geographies rather than capabilities. This customer experience and collaboration,
limits innovation and promotes the reuse of but the back-office processes, capabilities
core capabilities across the organisation, and technologies must also be addressed in
which causes challenges in an ever-changing tandem to maximise the benefit of collabo-
marketplace based on customer preferences, rative solutions. Asking for documents again
increased expectations, and additional regu- and again through a slick self-service inter-
latory requirements and scrutiny. In addition, face is not improving the experience; rather,
many of today’s LOS have been primarily it just puts a new face on a problem that has
designed around dated operating models. persisted for years.
• Almost all lenders have essential tech- OVERVIEW AND COMPARISON
nology components in place, but very few
OF DIGITAL MODELS
leverage them to the right level of value
realisation. Mortgage lenders and vendors A digital solution model enables a multi-
have enhanced some components but con- interface engagement (web, app, call centre,
tinue to lack the ability for full follow-through etc.). A fully digital model is unified to enable
to maximise these capabilities. For exam- collaboration between all participants of the
ple, digital documents are typically limited transaction, and includes the three primary
to the paperless value proposition. How- value enablers — borrower interaction, digi-
ever, the industry is a document-centric/ tal back office, and third-party interaction (see
data-centric field. There is limited use of Figure 5, page 14). When fully interconnected,
metadata or direct sourcing of data. This is an these enablers can position a lender to deliver
unrealised opportunity. Banks should leverage an integrated mortgage solution across the prod-
natural language processing (NLP) capabili- uct lifecycle that enhances customer experience,
ties one step further to satisfy, for example, increases efficiencies and drives down costs.
underwriting conditions. They should invest
in leveraging open banking capabilities being
added by CMA.
The Path Ahead for Mortgage Digitisation | 11Cognizant 20-20 Insights
A traditional model, by contrast, often includes with all parties, and leverages existing point
disjointed, fragmented systems that are woven solutions as core components, such as Agree-
together to solve end-to-end needs. Unlike the ment in Principle (AIP), Decision in Principle
digital model, the traditional model is more (DIP), conveyance, deed registration, etc. A
prone to manual work-around and rekeying of common user interface design enables rapid
redundant data, which adds risk to the process. changes and consistent experience regard-
The following are brief descriptions of the three less of engagement mode (web, mobile,
primary value enablers within the digital solution tablet, etc.).
model:
The following activities are often function-
• Borrower enablement within the ecosys- ality integrated within the borrower interac-
tem: The borrower interaction layer supports tion layer:
an end-to-end unified customer experience
»» Integrated intermediary portal.
via a singular solution set (see Figure 4). This
layer aggregates utilities across all borrower »» Integrated mortgage calculator.
engagement points to support collaboration »» Single source of AIP/DIP.
Borrower Enablement within the Ecosystem
Consumer Third-party interaction
functionality resides in the
Call Centre
Mortgage Advisor third-party interaction layer,
Branch
but exposes key experiences
via APIs.
API API
Estate Agent
BORROWER
API INTERACTION API
LAYER
Surveyor
Intermediary Customer-Facing
Channels Service Providers
API API
API
Solicitors
External Data Non-Customer-Facing
Suppliers Service Providers
Lender Mid Office
and Back Office
Figure 4
The Path Ahead for Mortgage Digitisation | 12Cognizant 20-20 Insights
»» One application: First-time buyer/Buy to For example, move the document request
let/Help to buy/Re-mortgage. from a simple ‘W2’ classification to include
a relationship to the borrower, employer
»» Integrated disclosure document.
and year.
»» Leveraging open banking to automate
income and assets calculation. »» Developing a comprehensive framework
that allows for relationships to exist
»» Uploading documents.
between specific document versions,
»» Scheduling valuation and survey. loan conditions and activity plans. This
»» Integrated solicitor and valuation ex- is the area where most lenders fall short.
change portal. Successful capture of the functionality
enables automation and ensures compli-
»» Status and messaging.
ance through exception management and
»» Information collaboration. effective process control.
»» E-signing.
• Third-party interaction: The third-party
• Digital back office: The digital back office interaction layer is focused on fully inte-
provides the lender with expanded meta- grating third parties within the process, and
data management and decision management expands third-party capabilities from prod-
tools by extending the document lifecycle uct ordering and fulfillment to collaborative
upstream, where specific document needs interactions throughout the third-party
have been determined, but have not yet been process (see Figure 5, next page). Borrow-
fulfilled. Most document lifecycles (from a er-facing capabilities are managed within the
data entity standpoint) begin with the receipt third-party interaction layer but experiences
of a requested document rather than at the are exposed through APIs. The layer provides
point the specific document need was iden- a singular solution set rather than a collec-
tified. Most lenders have an electronic folder tion of point solutions, is API-focused, and
without clear visibility to the specific valid leverages existing point solutions (such as
documents received and document needs mortgage calculator, e-signing, affordability
that are still outstanding. in principle, integrated solicitor/valuator) as
core components. The third-party interaction
»» Extending the document classifica- layer also provides deep value in expediting
tion to a deeper level to enable process the communication and collaboration of pro-
automation and process accuracy, and cess activities as well as enforcing origination
to minimise process risk. Metadata for policies and rules at the broker’s point of
the document is expanded from only ‘doc fulfillment.
type’ to include version and other data.
The Path Ahead for Mortgage Digitisation | 13Cognizant 20-20 Insights
Whereas a traditional model allows for the
aggregation of imaged files, the digital office
enables relationships to link the data within the
files to complete calculations, such as debt to
income, loan to value, etc.
Third-Party Interaction
Other
Third Parties Example of Real-Time
Information
BORROWER
• Home Insurance
INTERACTION • Movers
LAYER • Utility Transfer Example of Real-Time
Information
API • Listing Detail
• Contract Detail
Estate Agents
THIRD-PARTY Example of Real-Time
DIGITAL
BACK OFFICE API INTERACTION API Information
• Product Profile
LAYER • Pricing Profile
Surveyor • Available Calendar
Service Provider
Example of Real-Time
API API
Information
• Conveyance
Solicitors • Documents
CHANNELS (INCL. • Mortgage Advisor
INTERMEDIARIES) Calendar
Non-Customer-Facing
Service Providers
Figure 5
Functionalities integrated within the third- • Going deeper than simply developing a
party interaction layer often include the ‘virtual loan file’. Digital enables leveraging
following: the data relationships established to allow the
virtual loan file to contain a full understand-
»» Self-service scheduling with mortgage
ing of the documents included, in addition to
advisor.
the data extracted from the documents that
»» Intermediary relationship management drove the underwriting and processing deci-
(pricing scheme, compliance check). sions. Whereas a traditional model allows for
»» Delegation of document needs to partici- the aggregation of imaged files, the digital
pants (solicitor (buyer & seller), valuator. office enables relationships to link the data
within the files to complete calculations, such
»» Pricing.
as debt to income, loan to value, etc.
The Path Ahead for Mortgage Digitisation | 14Cognizant 20-20 Insights
Figure 6 provides a simplified view of traditional enabled through automated processes and
back-office core activities, resources, supported business rules. Figure 7 (page 16) provides the
systems and the process limitations. As depicted process areas where automation can altogether
in the diagram, the inefficient process is heavily replace or reduce manual intervention and inter-
reliant on human intervention to interpret docu- pretation. At the core of the digital back office is
ments, calculate loan values and then once again the ability to capture data and support enhanced
recalculate loan values. Implementation of digi- automation of processes. Figure 8 (page 17) pro-
tal back-office capabilities will provide increased vides an overview of how the digital back office
efficiency in underwriting due to clearly linked ingests data and documents to ensure that
supporting documents, improved accuracy underwriting requirements are addressed.
in loan calculations, and overall consistency
A Simplified View of the Traditional Back-Office Lending Process
Review to Derive Holistic Review
Core Receive Documents Review if Complete
Values & Adequacy & Underwriting
Activities & External Data & Appropriate
to Clear Decision
OCR & Human Based 100% Human Based 100% Human Based 100% Human Based
Resources
Leveraged
Systems Documents Stored Document Derived Values Stored Decision & Condition
Supported & Indexed Checklist & Condition Status Status Updated
Value limited to Requires human Requires humans to Highly inefficient —
Why Does It Not paperless value — interpretation of derive values — lacks requires that all
Work Well? deeper data capture completeness and consistency and prone prior conclusions
is needed. appropriateness. to accuracy issues. be reevaluated.
Figure 6
The Path Ahead for Mortgage Digitisation | 15Cognizant 20-20 Insights
An Alternative View of the Back-Office Lending Process
Ingest Store in Apply Perform
Core Document Expanded Rules
Manage
Accelerated
Activities & Data Data Model Management
Exceptions
UW Review
OCR & Human Based 100% Automated 100% Automated 20% to 40% 100% Human Based
Human Based
Resources
Leveraged
Expanded Data Capture from Expanded Use of Rules Management to Fully Transparent
Systems Documents & Direct Source Data from Automate Derived Values, and Make Decisions — View into Decisions,
Supported External Sources Delivering Exceptions to Associates Supporting Data
Capturing the deeper data from Systems make decisions while presenting Highly expedited
What Value documents and external sources enables exceptions to associates to address — underwriting that is
Does It Add? automation and deeper transparency reduces process wait time that manual clear, accurate and
into decisions. processes naturally create. consistent.
Figure 7
THE JOURNEY • Define technology requirements.
The journey should begin with a long-term view • Assess the current state.
in mind and the business value that can be
achieved with digital capabilities and offerings. • Define the future state.
Looking beyond existing utilities, systems and
• Implement technology.
applications that are on the market, organisa-
tions should align the core capabilities needed to • Provide ongoing review of capabilities.
achieve long-term business goals. This should be
carried out at a fairly detailed level to ensure the
Challenges
technology capabilities identified align with cur- When designing a plan to digitise the mortgage
rent as well as future business needs. process, organisations should carefully consider
the following challenges:
The technology selection should consider the
long- term journey and approach to optimise bor- • Technology cost spend. Budgeting should
rower engagement. When considering a solution, include plans for changes to the technology,
the strategy should: team structure, programme monitoring and
process reengineering. Clearly articulating
• Inventory current capabilities.
the digital business strategy and how tech-
• Identify capabilities needed/desired. nology can enable this strategy is imperative
The Path Ahead for Mortgage Digitisation | 16Cognizant 20-20 Insights
How the Digital Back Office Ingests Data & Documents
Establish a data model that Apply rules
Leverage existing supports the relationships Establish user views
management against
tools to expand the between investor conditions, that bring together the
the expanded data
capture of deeper derived values, aggregations value of the components
model to automate
detailed data to and the data sources to show what decisions
decisions and activity
support decisions. (docs or external sources). were made and why.
exceptions.
Document Rules Presentation
Data
& Data Management & Activity
Model
Ingestion & Orchestration Management
Workflow with full
transparency into
conclusions, supporting
derived values, linked
to documents/data
sources, linked to
metadata values.
Document Expanded SOR Rules LOS
Repository Database Repository SOR
Figure 8
to understanding the costs/benefits before fore review their data security protocols
undertaking a successful implementation. and ensure that they align to their digital
strategies.
• Changes resulting from process improve-
ment (e.g., potential disruption to culture).
LOOKING AHEAD
Process improvement associated with plans
to digitise the business should consider The digital transformation underway in the
potential disruptions to the culture of the mortgage industry is not a fad. Digital solu-
organisation. Current staffing may not align tions address numerous industry challenges.
to the competencies required in a fully digi- The process and technology transformation will
tised future state. personalise the customer experience, spur inno-
vation within products and service offerings,
• Digital alignment to vendor systems that increase compliance and lower origination costs.
might not yet support capabilities. Con- Lending institutions and mortgage servicers
straints related to third-party resources, such must adopt digital solutions to remain relevant.
as title companies and appraisal management Moving from a traditional mortgage model to
firms, which may not support fully digital a digital-solutions-based mortgage model will
capabilities, need to be considered. require dedicated organisational alignment. Dig-
ital is not just a box to be checked or leveraged
• Case for heightened data security. Data
only for pointed solutions to specific problems.
security will become even more important
post-digitisation. Organisations should there-
The Path Ahead for Mortgage Digitisation | 17Cognizant 20-20 Insights
ENDNOTES
1 ‘Customers 2020: A Progress Report’, Walker, www.walkerinfo.com/Customers2020/.
2 ‘Intermediary Mortgage Survey Report 2017’, The Intermediary Mortgage Lenders Association (IMLA), April 2018, www.imla.
org.uk/resources/publications/iress-intermediary-mortgage-survey-2018.pdf.
3 ’2017: State of the European Retail Banks’, AT Kearney, 1 July 2017, www.atkearney.co.uk/
news-media/news-releases/news-release/-/asset_publisher/00OIL7Jc67KL/content/2017-state-of-the-eu-
ropean-retail-banks/10192?inheritRedirect=false&redirect=http%3A%2F%2Fwww.atkearney.
co.uk%2Fnews-media%2Fnews-releases%2Fnews-release%3Fp_p_id%3D101_INSTANCE_00OIL7Jc67KL%26p_p_lifecy-
cle%3D0%26p_p_state%3Dnormal%26p_p_mode%3Dview%26p_p_col_id%3Dcolumn-2%26p_p_col_count%3D1.
4 ‘Digital change raising the bar for lenders, says CML research’, Council of Mortgage Lenders, 27 June 2017, www.cml.org.uk/
news/press-releases/digital-change-raising-the-bar-for-lenders-says-cml-research/.
5 ‘Intermediary Mortgage Survey Report 2017’, The Intermediary Mortgage Lenders Association (IMLA), April 2018, www.imla.
org.uk/resources/publications/iress-intermediary-mortgage-survey-2018.pdf.
ABOUT THE AUTHOR
Avishek Bimal Avishek Bimal is a Director with Cognizant Consulting’s Bank-
ing & Financial Services Practice. He has more than 15 years of
Director, Banking management and technology consulting experience in payments,
& Financial Services lending and retail banking. He is a mortgage lending subject matter
Practice, Cognizant expert (SME) with deep industry domain knowledge and experience
Consulting delivering complex transformation programmes, helping clients to
launch new businesses and delivering sustainable and long-term
success. He has worked with top-five banks around the world imple-
menting regulatory transformation programmes and launching
new origination channels for secured/unsecured lending products
as well as implementing lending commercial off-the-shelf (COTS)
products. He holds an MBA in finance from the Indian Institute of
Technology, Bombay, and a bachelor’s degree from NIT, Tiruchirap-
palli. Avishek can be reached at Avishek.Bimal@cognizant.com.
The Path Ahead for Mortgage Digitisation | 18Cognizant 20-20 Insights
The Path Ahead for Mortgage Digitisation | 19ABOUT COGNIZANT
Cognizant (Nasdaq-100: CTSH) is one of the world’s leading professionalservices companies, transforming clients’ business, operating and
technology models for the digital era. Our unique industry-based, consultative approach helps clients envision, build and run more innova-
tive and efficient businesses. Headquartered in the U.S., Cognizant is ranked 195 on the Fortune 500 and is consistently listed among the
most admired companies in the world. Learn how Cognizant helps clients lead with digital at www.cognizant.com or follow us @Cognizant.
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