Millennials make up a quarter of the world’s population and are unique in many ways. They are the first generation to grow up in the digital age, spending equal time on- and offline. If a service cannot be accessed from a mobile phone or app, a Millennial will look elsewhere. Millennials want to arrange their mortgages the same way they order food – with their phones or on websites. Is the mortgage market prepared for this?
Established mortgage lenders often use cumbersome lending processes that run on outdated technology, with little regard for the customer experience. The gap between this experience and the desired customer experience of Millennials is a major driver for the rapid growth of neobanks like Revolut, Bunq and N26. 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 strictly online. The popularity of neobanks is therefore not due to their product offering, but mainly to the successful facilitation of the customer journey of the digital age.
Customer journey of the digital age
The exclusively online service provision of neobanks is the primary driver behind their unprecedented growth. While neobanks were a rarity five years ago, they are now among the strongest financial brands in the world. The fact that you can become a customer anywhere in the world and at any time plays a crucial role in this. All required due diligence such as identity verification, credit checks and AML are completed in near real-time. With a traditional bank, this still requires a personal visit, a mountain of signed documents and a long turnaround. While neobanks are still seen as challengers by the industry, they represent the new standard for Millennials for their preferred customer experience.
Innovation comes from outside the mortgage market
With a solid lead in both customer experience and innovation, it is only a matter of time before neobanks diversify into a broader product offering. While N26 already offers various insurance products, Revolut customers can already invest in stocks and take out small private loans. It comes as no surprise that these products are also exclusively offered online.
Based on these developments, it is likely that neobanks will begin to offer fully digital mortgages before traditional mortgage lenders do. Where traditional parties benefit from capital and customer confidence, they lack the agility of their FinTech challengers. As the customer base of these FinTechs matures, so too will FinTechs themselves. The new life phase of their customers will therefore usher in a new phase for FinTechs. Rather than seeing their customers return to traditional banks, FinTechs will retain them by beginning to facilitate tailor-made digital mortgages.
This blog is based on Hyarchis’ new “Defining Mortgage Tech” report. For more insight on tomorrow’s mortgage industry, download the report here.Back to feed