The coming years will be intriguing for the Dutch mortgage market. The first generation to grow up in the internet age is entering the housing market and they will quickly notice the analogous nature of a mortgage application. While Millennials open bank accounts online within minutes with Revolut or invest their savings with eToro, the average Dutch mortgage lender still requires about 15 to 20 physical documents to assess a mortgage application. The question is: will the mortgage market adapt in time to provide the FinTech mortgage of the digital age or is there a FinTech revolution coming?
With an estimated size of €720 billion in outstanding mortgages, the Netherlands is home to a strong and stable mortgage market. The market is characterized by a relative calm, with an established landscape of mortgage advisors, mortgage lenders and mortgage servicers. This is very different from mortgage markets abroad, like in the United Kingdom, where FinTechs compete aggressively. Online mortgage broker Habito and online mortgage lender Molo compete not with the aim of stealing existing market share, but rather of securing future market share.
Customer journey of the digital age
Growing up in the digital age, Millennials are used to having access to an almost endless amount of information at the touch of a button. Millennials breathe technology, are articulate enough to manage their own affairs and are characterized above all by their impatience. They don’t expect results quickly, but immediately. The new generation spends an important part of their lives online and they don’t necessarily want to go offline when buying a house. Mortgage tech start-ups such as Molo and Habito meet their needs by providing FinTech mortgage services – that is, mortgages services arranged online.
If you look critically at these online providers, their product range is by no means innovative. The only thing that really sets them apart is the fact that they offer their products exclusively online. The popularity of these FinTechs is therefore not due to their product offering, but to the successful facilitation of the customer journey of the digital age. This is a key characteristic of the FinTech landscape.
Most successful FinTechs follow a simple strategy: focus on a small or underserved market and excel in it with one product or one service. Good examples are Transferwise, which facilitates international payments, and Signicat, which specializes in online identity verification. The FinTech ecosystem consists of a collection of micro-specialisms. These niche players lack the capital and the brand name of the existing parties. However, they possess the agility to meet customer demand quickly and efficiently. It is difficult for established parties to compete with this level of agility. There are two reasons for this, the first being their complex technology landscape and the second being the fact that they must divide their attention over a wide range of product and customer groups.
It can be tempting to fully commit to an initiative such as the online mortgage, but whether the online, FinTech mortgage will be the future is not the most important thing. What’s important is that a new generation is looking hard for their place in the housing market and that this generation is free to choose in ways previous generations simply weren’t. Their choices and behaviors are still developing and until they have taken shape, technological developments will follow each other at a rapid pace, with varying success. Just like technology, FinTechs will come and go.
An existing player succeeding in tomorrow’s mortgage market is therefore not determined by gambling on the right change initiative, but rather by their ability to adapt flexibly as an organization to the changing standards of a new generation. This is crucial going forward as the battle for the loyalty of the new generation will be settled in the years to come. If the Dutch mortgage market fails to facilitate the customer journey of the digital age in time, the Netherlands will follow the path of the U.K and see a niche of the mortgage market dominated by FinTechs and the FinTech mortgage.
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