Ideas & musings about consumer behaviour

Are online mortgage applications DEAD or are we on the edge of a new wave of innovation?

By Suzy Coulson, Digital Research Assistant, Global Reviews

Spring is well known as a peak season for the real estate market in Australia. Coupled with the recent drop in interest rates, there’s little doubt we are set to see a busy period for banks and lenders.

In May 2013, as part of our Digital Marketing research program, we conducted a behavioural study to explore how consumers currently go about researching and applying for a mortgage. During this study of 200 prospective Australian consumers, we asked them to go and find a home loan provider that best suited their needs. Around 70 mortgage providers were identified and considered across the study. With such a noisy and competitive market, lenders have a limited opportunity to engage and convert prospects, especially if their online sales journeys are not up to scratch.

During the study we asked consumers to recall five home loan providers in the market – as you’d expect, three of the big four banks were included in over 50% of lists, along with Aussie*.

Alongside the above consumer acquisition study, in June 2013 we also ran additional research on the digital sales journey of the more prominent brands in market; ANZ, Aussie, CBA, ING, NAB, RAMS, St George, UBank and Westpac. The objective was to measure how effective each of their product journeys were in selling to customers online and meeting the expectations of consumers.

Let’s get a glimpse of what we can learn from the research and what it may mean for the market…As an industry, the providers fell in line with one another as consumers are going about researching for products. The industry averaged a score of 53% in this phase of the Global Reviews Benchmark which evaluates how well the website supports matching customer needs, comparing options and motivating the customer to buy. Individual scores ranged from 47% to 59%. So with no stand out performer in this field, and all just delivering a fairly rudimentary customer experience, there is opportunity here.

Where did the application forms go?

It is not until we reach the final application stage of the customer sales journey where we see the biggest differences, with scores ranging from 1% to 55%, delivering an industry average of 19%. This disparity in scores is mostly driven by the application process as it appears that the industry is divided as to whether or not to provide online home loan applications. While we acknowledge the inherent complexity of a home loan application, consumers do differ in their individual needs and wants, and we predict demand for online applications being an innovation battleground in the coming years.

Looking at the following Brand Converter Quadrant, the big 4 banks, as we’d expect, enjoy stronger levels of unprompted brand recall in the mortgages category. However, what’s interesting is that their decision to remove the application form from the website has clumped them together, forced them to rely on their brand strength and offline channels. The challenger brands, ING Direct, St George and UBank are now fighting for the online consumer and it will be very interesting to observe their next steps as they look to further differentiate their online proposition and customer experiences moving forward.

ConverterQuadrantMortgagesQ2

 What do customers think?

When we asked how much of the research through to application process they would do online, 30% of consumers stated that they would prefer to complete the whole process online. Amongst the top preferred providers chosen by this 30% was UBank, which is one of the few providers that still provide online applications. Generally speaking, UBank isn’t considered to be one of the bigger players in this market, however we see a real opportunity for UBank to stake their position. We believe a focus on simplifying the application process would provide real differentiation in this market and the likes of UBank could definitely be onto a winner if they persist and innovate their online application process.

There is quite a different picture around mortgage application preference when we cast our eyes to the UK market. Up to 43% of customers in the UK would prefer to apply for a mortgage online. The industry clearly acknowledges this preference with many providers still delivering online applications.

Back to the Australian market, the 70% who prefer to apply via phone or in a branch had a different list of preferred lenders. This was where the traditional Big 4 banks, none of which allow for online applications, secured their place in top position. At this stage their preferred method of “closing the deal” is evidentially through a one-on-one experience.

What’s the next move?

We’ve recently seen a wave of changes come through the banking industry regarding the role websites and mobile apps are playing to broker better customer experiences. So is the current unavailability of online mortgage applications a sign that a more innovative experience is gearing up to be released, or is this a permanent departure from online applications, in which case opening the door for a more nimble provider to snatch up some market share?

In a world now driven by rapid access to information and online services, consumers expect simplification and optionality. This expectation doesn’t exclude the mortgage application process. When companies are already investing so much into their back-end systems, let’s hope they’re arranging themselves to align with the modern consumer.

* The scores and percentages quoted are based on a representative Australian sample who are currently or soon to be in the market for mortgages. Figures may change when observing via different customer segments.

For further information about these studies contact:

Ché Carbis
Senior Commercial Director
T: +61 3 9982 3419
M: +61 411 962 857
E: che.carbis@globalreviews.com

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