2016 North America Consumer Digital Banking Survey

Embracing Digital to Drive Mortgage Differentiation

While the digital transformation within Retail Banking is well underway, the push to develop client catered experiences still dominates the consumer wish list. Consumers still want to control their customer experience by focusing on value and a tailored approach through the channel that best satisfies their needs. To gain insight on how consumers are evolving their market interests, Accenture surveyed over 4,000 consumers in the United States and Canada as part of a multiyear research initiative tracking consumer banking attitudes and behaviors.

This report highlights the findings from the Accenture North America Consumer Retail Banking Survey, and suggests ways that mortgage lenders can improve relationships with current customers as well as explore opportunities to differentiate themselves in the market.

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Executed for the 4th time, this year’s Accenture survey of more than 4,000 consumers in the United States and Canada underscores how banks are being challenged to deliver a customer experience that blurs the lines between physical and digital. Five key findings reveal that banks must provide value to customers—or risk losing them—while delivering experiences that are easy, relevant and seamless.

VALUEHUNTING FOR

VALUE IS HOT

45%of consumers say

the top reason that they would stay loyal is if

their bank offers discounts on

purchases of interest.

RELATIONSHIPSWITCHING IS

NOT AN OBSTACLE

11%of consumers left their bank in the past year—and

consumer switching to virtual banks is at double-digit levels.

ADVICEROBO-ADVICE IS WELCOME

46%of consumers are willing to bank

using robo-advice in the future.

BRANCHTHE BRANCH IS ALIVE AND WELL

CHANNELOMNI-CHANNEL MANAGEMENT IS

LAGGING

87%of consumers will use their

branches in the future—and want human interaction

when they go there.

73%of consumers do not think the experience

they receive from their bank’s

branch, online and mobile channels

is completely seamless.

Accenture Consumer Survey Introduction

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How do Mortgage Lenders respond to rapidly evolving digital frontiers?

The introduction of Rocket Mortgage last year ignited a sense of urgency for the mortgage industry in building and delivering digital customer experiences. Our survey results show that 1 in 5 of customers did not use digital channels at any point in their mortgage purchase process. The industry still has a long road ahead to advancing digital capabilities to be on par with other industries and customer expectations. However, at the same time, these services are quickly becoming a commodity. Customers are not simply delighted with advanced digital capabilities but instead expect their lender to deliver on digital expectations, something they see being successfully implemented on demand in other areas of their consumer lives (e.g., Uber, Spotify, NETFLIX)

Our survey results also reflect that “simplifying the home buying process would change loyalty towards a customer’s primary bank”. That was the third largest driver of loyalty after “locating discounts” and “helping in the car buying process”. Clearly the complexity of the mortgage process stands out to customers as something they are looking for their lender to solve. As lenders look to retain mortgage customers in an increasingly competitive market environment they need to look for ways to streamline and simplify the mortgage experience. This includes providing more robust digital experiences for their online customers in addition to enabling their Loan Officers and physical channels with the right tools.

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Based on our experience in the industry, Accenture has five key recommendations for how Mortgage lenders should respond to consumer demands and place themselves in a position to compete more effectively.

A seamless omni-channel experience is keyInvestment in digital capabilities for mortgage is a high priority for lenders. Consumers use online banking frequently—60 percent use it at least weekly. Mortgage lenders need to leverage customers’ online footprint to capitalize on lead generation capabilities including online scenario analysis and calculator tools through full application. Customers should be able to continue interacting with their lender via online or mobile channels throughout the origination process.

As lenders improve digital capabilities across all their channels, both physical and virtual, it is critical to deliver a seamless omni-channel experience. Customers want to engage with their lender through their preferred channel based on the service needed at that particular point in their lifecycle journey. For example, the mobile channel is most commonly used for transaction services—to upload a document or check status of their loan application. Lenders should be aware of how customers prefer to interact with them via the various channels while also allowing them to move seamlessly in between. A customer may choose to start a mortgage application online or via mobile but finish the application with a Loan Officer in person or on the phone.

The role of the Loan Officer is as crucial as everDigital transformation is bringing convenience and simplification to the mortgage origination experience and lenders are rightfully investing in these capabilities. This new online experience enables a higher degree of customer self-service but does not replace the role of the Loan Officer. Rather, it does require the Loan Officer to tightly integrate with the new experience. Our survey found that consumers are still visiting branches as frequently as before to have their personal needs met. Approximately 25% of the surveyed population noted they use a branch at least weekly, making the branch the second most preferred channel after online. Consumers still want human interaction—particularly for complex transactions like mortgage. Lenders must make Loan Officer’s available to satisfy customer face-to-face needs while ensuring the Loan Officer embraces channel flexibility as many customers may choose to start online then engage with an Loan Officer or start in the branch and finish online. Either way, Loan Officer’s must embrace new digital technologies and use these capabilities to enhance their interaction with customers, not replace them.

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Differentiate with Artificial Intelligence (AI)Intelligent automation is a key enabler to keeping pace with the light speed nature of digital change. Machines have different strengths and capabilities that compliment a traditional workforce and drive competitive advantage. Our survey shows that consumers now welcome robo advice as a part of their banking relationship with 46% of all consumers and 80% of millennials willing to use this disruptive technology. Robo-advice is the use of automation and digital banking techniques to assist customers with their financial needs. It uses questionnaires and advanced algorithms to profile customers and make insight-based financial recommendations.

There has been rapid adoption of robo-advice capabilities by investment management firms—the mortgage industry is late to the game in adopting these capabilities. Lenders can use robo as an opportunity to differentiate in the market and bring AI to their customer base ahead of the competition. AI capabilities can be introduced to provide mortgage advice and enhance capabilities around scenario analysis and product recommendations. A Chatbot mortgage advisor would give the industry the opportunity to scale its Loan Officers, enhance customer experience and drive down the cost of sales. In addition, these capabilities support compliance objectives by providing fully audited records of client interactions with the lender. Leveraging the increasing trend in “Robo Advice” and using the latest Artificial Intelligence technology, Accenture has created “Collette”, a prototype virtual mortgage adviser. Using cognitive science, natural language understanding and user-centred design, Collette gathers information about a customer’s needs and circumstances and ultimately makes a personalised recommendation of the best mortgage product.

Relationship is dictated by needs not loyaltyConsumer interactions with banks have shifted from loyalty-based to transactional-based relationships. Nimble and digitally-savvy consumers are not tied to one bank for all of their financial needs as online channels have broken barriers for switching between institutions.

This is particularly true for mortgage clients. On average, only 10%-20% of customers hold mortgages with their primary bank. Even where that percentage is higher it is often the result of third party originated volume as opposed to the bank cross-selling or retaining their own customers. Lenders need to leverage more advanced lead generation and lead management tools to retain and capture mortgage volume. Often lenders are not aware of attrition within their portfolio until after the consumer has already chosen to leave. Leading lenders are able to leverage internal data combined with new alternative data sources to proactively identify when customers are in the market for a mortgage product. Once a lead is identified, lenders should look to leverage digital marketing tools to personalize content and distribution channel.

The solution can be complex and requires a well thought out technology architecture to integrate the needed tools. At the center of lead generation and management sits a CRM tool, like SalesForce. The challenge is not to simply implement a new CRM tool. Rather, it is to optimize the architecture such that digital marketing, digital front ends, enterprise data warehouses and loan origination platforms are tightly integrated. The output is high quality leads that improve conversion rates of a lender’s salesforce.

The price has to be rightFor mortgage clients, more than any other, the price has to be right. Consumers overwhelmingly want their banks to act as value discounters on their behalf. Forty-five percent of consumers say the top reason that they would stay loyal to their bank is if it offers discounts on purchases of interest.

Relationship-based pricing is crucial in today’s market. Customers want to be recognized for their relationship, but in order for the bank to remain profitable, it is crucial to properly manage their data, understand the needs of each customer segment, and define discounts, rewards, or priority service that align to those customer needs. For some customers, pricing discounts are the highest priority, while others value their time more highly, so concierge service is their biggest need.

Another key tenet of successful relationship pricing is to offer discounts, rewards, or priority service that incentivize the customer to deepen his/her relationship. The incremental assets and products will lead to increased profitability for the Bank. Which leads to the importance of understanding the financials of each customer segment. Customer and segment level profitability should be analyzed in light of any discounts, rewards, or priority service.

Banks are not profitable if every customer gets a “hometown” discount. So banks need to be smart and stay relevant in terms of what rates are offered to which customers. Relevance comes from rich customer data insight. Fortunately for banks, consumers are open to sharing personal data with them. Sixty-three percent are willing to share data to receive relevant product and service options. Consumers want banks to manage their personal data to provide more competitive prices, enable faster and easier services, offer personalized advice, and simplify the mortgage process.

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Conclusion: Evolve customer interaction model

Today’s mortgage lenders need to evolve their approach to consumers by re-defining the interaction model. A balance between digital and human interactions are key to capturing the right client and maintaining a profitable relationship. To do so, lenders should focus on these 5 key actions.

DEVELOP A MARKET-RELEVANT CLIENT PROPENSITY MODELLeading digital capabilities cannot disintermediate product and price when driving a mortgage decision. While some customers may prioritize a seamless customer experience there is still a minimal tolerance on what that experience will cost them relative to competition. Lenders need to determine how to drive the right relationship based offers while also managing their bottom line in a constrained margin business.

TAKE ADVANTAGE OF DATALenders have access to vast amounts of borrower data inside and outside of their own four walls. Internal data, whether from loan servicing systems or enterprise wide customer information systems, is at a lenders disposal and is seldom used to their advantage. With the introduction of new tools, external data can come from sources like public records and social media. The combination of both data sets—internal and external—markedly improves retention, marketing effectiveness and conversion rates of leads.

ENABLE THE LOAN OFFICERThe role of the Loan Officer is as critical as ever. Customers demand a digital experience while expecting an option for human interaction during complex transactions, like a mortgage. Thus, the LO plays a crucial role to ensure customers gets the experience they need. This requires them to work at the intersection of physical and digital and seamlessly support customers between both channels throughout the lifecycle.

ADOPT INTELLIGENT AUTOMATIONLenders need to look for opportunities to integrate automation technology and tools into the mortgage lending environment. We have already seen adoption of Robotic Process Automation with the utilization of “robots” to run end-to-end or component processes through a virtual workforce. Advanced artificial intelligence will be the next wave to achieve intelligent decisioning and cognitive learning capabilities.

INTEGRATE DIGITAL SOLUTIONS WITH A TARGET IN MINDDigital mortgage solutions are quickly becoming table stakes and speed to market is commonly a core guiding principle of a lender’s digital mortgage transformations. Lenders must balance the desire for speed while designing a target solution that will deliver outcomes that meet future needs. While each digital capability serves an individual purpose, when the individual parts are strategically combined, the resulting returns are maximized.

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Kelly Adkisson Managing Director, North America Credit Consulting Lead kelly.m.adkisson@accenture.com

John Newlin Senior Manager - Residential Mortgage Lead john.k.newlin@accenture.com

David W. Helin Thought Leadership Research Principal Director Accenture Research david.w.helin@accenture.com

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