Opportunities to Digitise in Bridging Finance
Last week we held an exclusive workshop for the bridging finance community to explore the opportunities that can be gained by digitising their loan and application processes.
The event brought together some of the largest lenders in the bridging space and allowed us to learn more about their current application processes and the relationships with their brokers, whilst also discussing how technology can help them streamline their operations and support and empower their brokers.
Here, we share some insights gained from the day and summarise the key takeaways, highlighting the main opportunities that lenders see to digitise in bridging finance.
Speed and Efficiency is Paramount
Prior to the event, all participants were sent a survey asking them about the most important aspects of their business strategy and by far, efficiency came out top with 85% of the audience stating that although there are many important elements of the application process that speed will always win, even over competitive interest rates. One lender stated that once the borrower has accepted the proposal, speed to completion and drawdown is of utmost importance and that bridging lending by its very nature is inherently fast and is what the broker and borrower will expect.
The discussion around speed and efficiency led to the methods that brokers use to communicate with the lender – whether to request a quote or to submit personal documents and information as required by the lender. Email stood out as the most used tool, with all lenders stating that although it is an inefficient method that can slow the application process down, run the risk of error, and result in sensitive information being sent to the wrong person inadvertently, that brokers like the flexibility and simplicity of email to submit and manage their cases.
Many lenders have invested, or are looking to invest, in portals to combat some of the issues around using email and to structure the information better so they can better process cases long-term, but it was stated that most brokers do not like portals – they dislike having so many different logins, find them complex with too many fields to complete and quite often find another way to submit information (normally via email or post).
The consensus was that, ultimately, the broker will always stick to what they know and choose the path of least resistance. However, although ‘broker adoption’ can be a barrier in deploying new technologies, the lenders in our group believe there are opportunities to not only educate brokers on the value of innovative technologies and how they can make their jobs easier, but also to introduce new, easy-to-use, simplified technology that works alongside their existing methods, such as applications to gather and submit documents or using Artificial Intelligence (AI) to ‘read’ the information from an email and input this into a portal, CRM system or loan origination solution.
Broker Advocacy and Satisfaction
One common theme that was highlighted during the event was broker advocacy and fostering stronger relationships with brokers to encourage repeat business. Over 80% of our group classed this as one of the core elements of their business strategy, with many of the workshop attendees agreeing that broker advocacy was primarily built on three interconnecting factors:
- Speed to process the application and deliver funds: as discussed, with bridging loans being a type of short-term finance that meet specific borrowing needs and resolve temporary financial shortfalls, speed is much more important to brokers than interest rates and charges when choosing a bridging lender.
- Make good on promises: as one lender stated, one of main ways to gain and build trust with a broker is to do what you say you are going to do – “if you say you can get the funds to the borrower in 10 days, you deliver this in 10 days”.
- Reputation: trust and transparency are vital in the bridging lending space, not only to build and maintain relationships with brokers, but also to ensure continued and repeat business from the broker, and in turn, from the borrower to the broker.
Although lenders are aware of the factors that help build successful relationships with their brokers, it came to light during the workshop that additional parties in the chain, such as solicitors and surveyors, can introduce bottlenecks, causing delays that slow the application process down and impact the broker-lender relationship. All delegates agreed that in most cases the broker and the customer will see the lender as the main party that should be driving the deal and pushing it forward. Backlogs with solicitors and surveyors result in a large volume of calls to the lender to see where the case is up to, even though these factors are out of the lender’s hands.
This point opened up a discussion with the group of using technology to streamline the offer-to-completion journey by having an end-to-end communication channel between each party: customer – broker – surveyor - solicitor. This would provide transparency and improve communication between all parties in the chain, and overall, speed up the application to release the funds.
Communication is key for loan servicing
Aligned very closely with broker advocacy, loan servicing and post-completion communications was an area that our group said was extremely important to them, especially when it comes to broker and customer retention.
Unlike a normal residential mortgage, which, once the funds have been released, sees the broker and the customer have little communication with the lender, a bridging loan is much different in that frequent communication is not only common but a vital part of the application and post-completion process.
Due to the loan being for a period of a maximum of 12 months, the relationship with the customer is much more in-depth with regular contact throughout the term of the loan on aspects such as the progress of the project and updates on the exit strategy and payback plan. Similarly, as one lender stated, when a borrower approaches the end of their term, they may wish to extend or refinance their outstanding loans to release more funds, or it could be that they want to redeem the original loan but take out another loan for their next project, therefore it is imperative to ensure regular communication with the customer to secure repeat business.
Technology can play a major part in this communication strategy by having regular touchpoints with the customer during the loan term. Whether it is reminding them to provide project updates or advising them of repayment deadlines, by automating communication workflows, lenders can ensure they are effectively engaging with their customers and are top of mind for their next bridging loan.
Regulatory compliance is the focus for tech investment
When it comes to investing in technology and how they prioritise tech spend, all lenders within the workshop stated that anything that helps them adhere to regulations and be more compliant will always take precedence. This is an area that has received increased focus of late with the introduction of the FCA’s new Consumer Duty regulation, which is driving firms to think more about compliance and their protection strategies.
Following this, speed and efficiency was again noted as an important factor when looking to invest in technology, followed by the capacity to change their operations and the time and effort it would take to deploy new technology.
Although all lenders recognise the benefits that can be gained with innovative technologies, some were unsure if they were really getting the value from the investment made in certain systems such as their CRM solutions. That said, all lenders advised that they had been busy recruiting into their teams’ and now wanted to focus on technology to help them expand and grow, with 80% stating they intended to invest either the same or even more into IT infrastructure.
How can Nivo help?
The workshop highlighted there are many ways in which Nivo’s secure instant messaging and digital identity application can be used to support our bridging lenders and their brokers, and ultimately the borrower.
Nivo offers the ability to streamline communications, increase engagement and optimise the customer journey. The Nivo mobile app can enable customers to engage with brokers and lenders 24/7 helping them to deliver all the information they need to progress their bridging loan.
Using the application results in significant reductions in application processing times, for example, one lender was able to conduct ID security checks and also receive documents required as part of the application in 23 minutes using the app - a process that previously took 10 days using legacy channels such as phone and post. Such is the success of the new process, the lender’s NPS has now increased to +72 from -43.
The application could also be used as part of post-completion engagement between the lender and the borrower. Frequent messages can be automated to remind the borrower of looming deadlines or to update the lender on the delivery of the project.
Furthermore, the technology can be extended to other parties of the chain to include surveyors and solicitors for example. Doing so would speed up communications and processes throughout the journey, which could result in the loan being completed faster and the funds being released quicker, which is the main goal in bridging lending.
To find out more about our secure instant messaging and digital identity application, or express interest in out next bridging event, contact us here.