Intermediaries and technology
How are digital lending platforms affecting brokers?
‘Going digital’ is becoming increasingly important to help brokers and other financial intermediaries remain competitive.
The commercial lending market is seeing the emergence of new ‘fin-tech’ players and a gradual shift towards digital platforms.
We’ve recently carried out some research to find out how the changing digital landscape is impacting on brokers. It highlights some of the key factors that financial intermediaries are looking for from their providers to help deliver for their clients.
Brokers want quick access to a wide selection of lenders to meet a range of client needs with minimum hassle while providing a professional service.
Quality and continuity of personal relationships, consistency between front and back office operations, early warning of potential issues to help manage client expectations, and sector expertise are also stand-out broker requirements.
Broking clients want regular updates on their lending applications, so speed of response from potential providers can be a big factor in selecting a lender in some sectors. However, most brokers accept that it can take longer to get the right deal in complex cases.
How is digital technology changing how lenders operate?
Our research shows that intermediaries believe the market is working fairly well, with a wide choice of lenders, largely transparent pricing and few barriers to switching provider.
It also highlights a gradual shift by providers towards digital, but suggests that this has yet to disrupt the market fundamentally. Many intermediaries see a purely digital offering as suitable only for the most straightforward lending requirements.
Based on our research, some brokers suggest that, although clearly hungry for business, the ‘digital-only’ propositions of the challenger banks can come at the expense of personal relationships. They also cite a tendency for digital-only providers to focus on the ‘wrong’ issues and sometimes lengthy or overly-bureaucratic decision-making processes, which can clearly have a negative impact on meeting their clients’ needs.
Anything that can speed up the lending application process is clearly a good thing for brokers and their clients, but online applications also put more onus on the broker. Many see the potential benefits of online portals to upload client information and track cases, but are yet to be convinced by a fully-digital process due to time-consuming and inconsistent online experiences using the existing systems.
So, while providers are seen as making incremental gains by moving online, at present there are relatively few examples of genuinely new business models compared to traditional lenders.
But is this about to change?
You will no doubt be aware of Open Banking, which is set to transform how current account customers access financial services, through the use of data sharing and digital platforms. A smarter use of open data and digital services could also have a role to play in driving brokers’ income by getting deals done more efficiently and at potentially lower cost, while managing client expectations.
This means better case tracking and drawdown, quick response to queries and clarity on timescales, as well as the expertise and personal relationships that brokers value.
How can intermediaries get the most out of digital?
Many intermediaries see the benefits of digital transformation but, understandably, want to maintain the personal touch in their relationships with providers.
Brokers’ investment in technology to date has often been focused on improving the efficiency of their internal processes.
Those with well-developed customer relationship management systems are seeing the efficiency benefits of new ways of doing business and looking at how they can integrate their own systems with providers, particularly for lower value transactions. For example, some brokers now use automatic follow-up alerts to chase lenders. This can help avoid duplication of effort with multiple lenders and improve response times for clients.
The key is for brokers to be prepared for further digitisation, so they get the best of both worlds – the efficiency of online transactions without losing the ability to finesse a deal by picking up the phone to their contact at the lender.
There is huge potential for intermediaries to use open data and digitisation of standard processes to support their clients’ needs. The key to success is to carefully evaluate the benefits of going digital for your business and be prepared to embrace further change in the future.
If you would like to find out more about future-proofing your broking business through digital technology, please contact your Business Development team.