Banks: fix your mortgage process by becoming truly digital

 Ross Gallagher photo
Ross Gallagher Venture Manager at 11:FS
5min read

Mortgages are broken.

Yep, we said it.

Mortgages are an essential (albeit painful) part of the home ownership process. The products themselves are complex and intimidating, offering very little differentiation or added value across providers. Lenders compete on price rather than service, with mortgages becoming little more than complicated commodity products. Not to mention, turnaround times for applications often take months and place an administrative burden on wannabe homeowners.

These complex processes also happen to be highly inefficient, resulting in higher costs for lenders. This in turn hits their profitability.

So it’s a lose lose for big banks and lenders, and a lose lose for customers...

What’s been done about it?

Digital transformation efforts have resulted in shiny new veneers powered by the same ineffective underlying technologies and ways of working. Customers can now manage parts of the application online, but branch visits and paper-based processes are still a basic requirement.

If anything, this hybrid approach is actually worse for customers, because it’s less personalised and removes none of the admin load.

The first wave of digital challengers entering the mortgages space have found clever ways to abstract away from the pain without actually addressing the fundamental issues. Digital brokers, like Habito and Trussle, have established themselves as key players in the space by managing the application process on behalf of applicants and delivering a more streamlined experience.

Where it all went wrong 📉

While margin on transactions traditionally remained high over the years, there’s been no real incentive for change. As margins began to decline, traditional lenders have looked for ways to strip out costs while simultaneously trying to keep interest rates as low as possible in order to remain competitive. This relentless attempt to drive down costs has seen lenders dismantle and outsource many of their internal activities and processes. But by introducing these external third parties, lenders also positioned themselves further away from the customers whose problems they should be trying to solve, creating a vicious, self-defeating cycle.

Then came the global pandemic.

Bank staff began working remotely and customers were unable to visit bank branches. The manual core processes that underpinned the mortgage market stopped working - almost overnight. Their outsourcing arrangements collapsed because those outsourced staff couldn’t work from home. Banks rushed to implement “digitised” solutions but these proved ineffective.

Before they knew it, they were faced with spiralling backlogs and turnaround times as applications stacked up.

Digitised front ends won’t fix it (and outsourcing makes it worse)

The true potential in the shift from analogue to digital was misinterpreted by incumbents, who saw this shift mainly as an exercise in cost reduction.

The new digital front ends designed to help customers self-serve, powered by the same underlying technologies and processes, created user experiences that flattered to deceive rather than delivering enhanced value to users. (If you’ve ever tried to apply for a mortgage online, you’ll know what I’m talking about.)

Over time, lenders continued to outsource more critical business activities. Little did they realise the impact this would have on their ability to address the needs of their customers.

Providers are now realising that they’ve reached the limit of what can be achieved through this outsourcing approach. JP Morgan’s CEO Jamie Dimon recently referred to the “horror stories” lenders have spun, from what he termed “outsourcing your heart, your soul and your nervous system”.

By digitising their analogue processes and outsourcing key activities and processes, big banks have disintermediated themselves from their customer base. They’ve left a huge opportunity on the table - inevitably to be picked up by a new breed of mortgage providers offering truly digital solutions to real customer problems.

The true potential in the shift from analogue to digital was misinterpreted by incumbents, who saw this shift as an exercise in cost reduction.

A new wave of challengers is emerging 🐣

Rather than using existing mortgage products as the starting point for digital transformation, these new challengers are scrutinising the entire journey to home ownership. This helps them to solve some crucial user problems along the way, in some cases, rethinking the role of the mortgage entirely.

They’re not bound by legacy products, infrastructure or processes.

Instead, they:

  • Focus relentlessly on their target customer

  • Have a detailed understanding of their pain points

  • Design truly digital services that deliver real value, positioning them as a natural partner for hopeful homeowners

  • Deliver exceptional experiences, underpinned by modern technologies and digitally-native ways of working

Who’s making moves in the industry?


Nude has been built exclusively for first-time buyers in the UK. The app sets users up with the goal of buying their first home and then tracks their spending with that in mind, providing the insights needed to reduce the time it takes to achieve their goal.

Nude invests its customers’ money into savings and government schemes, helping them to navigate the complex Help to Buy initiatives and maximising their returns.


Currently offering early access, Dwelling is a US-based fintech helping to demystify the home ownership process for users. Dwelling has built an innovative platform that combines users’ individual finances with real estate data to provide actionable insights to help supercharge their savings habits. Dwelling helps people to buy their home, streamlining the process and passing back significant expenses and fees to the customer along the way.


Proportunity addresses the very real hurdle of affordability in the UK housing market. Using Proportunity, buyers can put down a bigger deposit and therefore secure a more competitive mortgage. It does this by providing an equity loan of 15% of the property value, which means that the business shares in the risk of prices fluctuating over time. But their machine learning forecasting helps to manage this risk through better use of data, leading to better outcomes for both parties.


Wayhome is a gradual home-ownership scheme that (once launched) will allow first time buyers in the UK to buy a share in a property without a mortgage. The model lets customers part-own, part-rent their property with a minimum 5% deposit. They can then choose to buy more of the property whenever they want. Backed by Allianz Global Investors, Wayhome will have a selection of pre-approved properties for customers to choose from. It also pays a proportion of the stamp duty and legal costs up front.

Divvy Homes

US-based Divvy works by purchasing the home on behalf of the customer and then renting it back to them for up to three years while they build up their equity, credit and savings. The renter contributes up to 2% of the value of the home and roughly 25% of each subsequent monthly payment goes towards saving for a deposit, setting them up to apply for a mortgage once they’re ready. The customer can buy the home at any time during their three-year lease.

Will the home ownership experience ever be truly digital?

There’s plenty to suggest that 2021 will be the year of property 🏡

Winners will undoubtedly be firms who recognise and embrace the true potential of digital.

This is not an exercise in cost-cutting, nor is it a veneer. It’s everything.

While it won’t necessarily be easy, there is enormous opportunity for incumbents who choose to embrace this disruption on the front foot, enabling them to:

  • Create innovative, value-adding propositions informed by an in-depth understanding of the customer and their needs

  • Enable these propositions using modular core infrastructure and a comprehensive ‘Build, Buy and Partner’ strategy

  • Offer customer experiences that are underpinned by digitally-native workflow capabilities and ways of working

  • Reduce the cost to serve and improve their speed to market

But bringing key activities and capabilities back in-house, restructuring around customer outcomes and identifying where third-party vendor solutions can deliver better outcomes for customers will be key to their success.

By leveraging the full potential of digital in this way, banks will be able to master the next generation of truly digital home ownership experiences.

 Ross Gallagher
About the author

Ross Gallagher

Ross has considerable experience designing and optimising card payment and other digital banking services for tier 1 banks. At 11:FS his focus is working with global brands to build world-class digital challenger banks.