Innovation in banking often arises in customer-owned banks or mutual banks. They are able to respond rapidly to tech developments, a feature that other banks might lack. Innovation is driven by customer need – and in this case, the customers are the ones making decisions.
Whether there is demand for a specfic app or the need to alter the way loans are provided, innovative technology can provide precise solutions.
While the actual product (in this case a loan) might not change, innovation in the service might bring tremendous benefits to the bank’s customers, and therefore to the bank itself.
Technology can, for example, enhance service functionality with a mobile app. The app could function as the primary customer interface, addressing everything from the loan application itself to managing the repayments.
It is no surprise that customers value user-friendly, efficient services. This is often the main selling point, and a clincher when a customer is choosing a service.
The data gathered from our pool of over 300,000 emerging tech companies provides valuable insights, and can help predict future trends and support a better understanding of the market.
The graph below indicates growth in investment in fintech companies. Investment has been growing steadily year on year since 2010. There is, however, one year that stands out.
Investment in 2015 almost doubled compared to the previous year. This was the year fintech entered the mainstream. Since then, significant growth has occured in investment.
Already in the first half of 2020, investment was at €18.1B – 90% of the total investment in 2019.
Next up we have a market segmentation. It breaks down the investment in fintech into more specific fields. As our interest lies in housing loan technology, we can rule out the rest and concentrate solely on consumer finance.
This group consists of companies that operate in the field of consumer finance. This could, for example mean: real estate tech, online lending platforms or mortgage tech.
The invested amount is relatively large for this group of companies. By comparison the investment in financial software, although twice as large, was made by seven times more companies.
It is good to note that this graph is specifically looking at companies founded after 2010 in North America & Europe.
To gain an even better understanding of consumer finance, we broke down the technologies used within the industry. As usual AI, machine learning and big data are at the vanguard of this technological surge. The graph below gives a clear idea of which technologies are used in consumer finance.
However, we took a slightly different perspective in categorising the main trends. By looking at the companies’ offerings, we were able to group them in a way that presents the solution landscape more clearly.
The four main trends that could be seen were: Blockchain-powered solutions, AI-powered solutions, online lending platforms & mortgage technology. These are discussed further after the graph.
The Four Main Trends in Consumer Finance
One example of blockchain-powered solutions is platforms which help track and manage payments in a way that ensures the privacy of the customer’s data. These types of offerings are highly valued, as privacy is becoming more and more important to people.
It has already been three years since GDPR was implemented. Although the regulation did have a positive impact on data protection, there’s still a long way to go. Less than 50% of Europeans are aware of their right to access personal data processed by private companies.
In addition, according to a 2020 study by Forrester Research, only half of European businesses use software meant to assess risk and ensure compliance in the GDPR.
Blockchain is a powerful tool for addressing this issue and will certainly be increasingly used throughout the decade.
Artificial intelligence has a virtually endless range of possible applications. This is why it has gained such a large amount of interest in every industry.
With house loans for example, it could mean the automation of the financial review process. As a result, the assessment and analysis of creditworthiness would become faster and more accurate.
In the mortgage industry hundreds of pages have to be processed for every loan, which is a very costly part of the process. With the help of AI this could be partly or completely automated, saving money and time for more important tasks.
If implemented properly overall data accuracy would also increase, while ensuring the privacy of the data.
Online Lending Platform
Online lending platforms make loans extremely accessible. The users on these platforms are either lenders or borrowers. Such platforms connect these people together. It’s kind of like the Tinder of investing.
It is common for both lenders and borrowers to be ranked, to promote and maintain trust.
As this is an alternative to obtaining a loan from the bank, the rates are often very competitive. There are therefore less costs for the participants compared to traditional methods.
As with other online services, there are concerns about credibility. However, basic caution applies to everything related to investment, and money in general.
It may seem that these trends overlap each other, and this might be true. However, mortgage technology is a crucial aspect in housing loan innovations, and we have therefore kept it separate.
While the main technologies used are AI and big data, the COVID-19 pandemic has had a great impact on mortgage technology. This has surprisingly been a positive impact. While other industries are struggling to cope, business in the mortgage industry is thriving.
With nearly everyone working remotely, adaptations have had to been made. These adaptations have saved a lot of money. They are in fact driving the future of mortgage technology and we can’t wait to see what the future holds.
Here is an example of a tool designed to automate mortgage documents