Using television commercials and marketing initiatives as an indicator of public interest in digital mortgages, you might think the entire world was clamoring to make one of their biggest financial life choices by saying, “Alexa, get me a mortgage.”
It is not. In fact, many American consumers struggle to define what, exactly, constitutes a digital mortgage.
Given the industry’s laser focus on all things digital, we wanted to take the pulse of consumers to see the impact of what lenders have been communicating on this topic and how comfortable people are with the idea of a digital mortgage.
We conducted a survey of 1,500 consumers and the responses we received may be surprising to many.
First, there was a striking lack of clarity in the marketplace. When asked to define what a “digital mortgage” is in their own words, consumers struggled to define it at all, which highlights both the opportunity and challenge lenders currently face.
If customers don’t know what a digital mortgage even is, selling them on the benefits could prove difficult. Clearly, a dose of customer education is in order.
Second, when we probed, we found a healthy amount of discomfort in applying for one. More than one in four respondents strongly disagreed with the notion that they’d be completely comfortable with a digital mortgage.
One of the key factors driving this discomfort was a belief that their financial information would not be totally secure. With numerous data breaches over the last few years, security is ever-present in the mind of the consumer. Lenders seeking to encourage more digital interaction should make their security capabilities known to give consumers confidence and put their minds at ease.
While there are clearly factors that might hold people back when it comes to a digital mortgage, not all borrowers are opposed.
The average borrower considers the traditional mortgage process to be sluggish, burdensome, and generally inconvenient. That is not surprising, given the multiple steps a typical mortgage entails, with multiple rounds of document submissions typically spanning a month or more.
Understandably, given this attitude, more than one in three consumers indicated the single largest benefit of a digital mortgage is convenience (24/7 access), nearly double the second most common answer of a speedier process.
Lenders need to recognize that technology should not exist just for its own sake, but that it should allow them to internalize what consumers value and how it might enable them to make the process faster, less cumbersome, and more secure. Merely relabeling the same old, same old as a “digital mortgage” helps no one.
Knowing that convenience is crucial and speed is also valuable, we come back to the original question posed to customers: What things must be true for the experience to be called a “digital mortgage” in their opinion?
The top answer by far was that the process had to be “fully paperless,” with almost half of respondents saying that was a defining characteristic.
More than one in three respondents also said they needed to be able to complete the application online and sign all documents online. As lenders design and update their digital offerings, it is critical that capabilities align with consumer expectations.
While some lenders appear to be heading in the right direction, there is still a lot of work left to be done to not only ensure the capabilities are available, but that they are well-communicated and align with consumer expectations.
Last but certainly not least, lenders must remember that a digital mortgage is not the same as a self-service mortgage. Less than one in three consumers defined a “digital mortgage” as having no human interaction (in-person or via phone).
When asked if they believed it is important that homebuyers talk to a loan officer during the mortgage process, 32% strongly agreed and just 18% said they disagree. No doubt this may change over time, but today, and for the foreseeable future, consumers aren’t ready to give up the personal connection even if they originate via digital channels.
This is important information for mortgage companies who have been spending heavily on new technology and marketing to support the growth of that new technology. There is still a great deal of work to be done in educating consumers about these offerings and comforting them that going digital does not mean going it alone.