Why Mortgage Lenders Should Invest in AI Technology

Human picture with digitization

Artificial intelligence (AI) grows more sophisticated by the day, and it continues to make work easier with its various applications in healthcare, logistics, education, and even finance. It should come as no surprise, then, that the global market for AI is expected to be worth $228.3 billion (£164 billion) in 2026

And although the ongoing pandemic is hampering the development of multiple industries, AI is helping others bounce back and even flourish against all odds. In particular, AI has transformed the face of the mortgage industry for the better, making services more accessible, convenient, and understandable to a broader customer base. Here's why mortgage lenders should consider hopping on the AI bandwagon.

It streamlines operations

One of the most common applications of AI is automation, and 55% of executives in the mortgage industry believe AI helps make their firm more competitive.

As previously discussed here in our post ‘AI and the Transformation of the Mortgage Industry’, as much as 40% of the average lending process requires manual processing. With automation, though, many redundant tasks can be eliminated, meaning lenders can focus on more demanding cognitive tasks. This means you'll be working more efficiently, and increasing productivity.

It maximises marketing benefits

AI's proficiency in automation also means you get the most out of your marketing budget. Similar to Facebook's marketing algorithms, AI tools can be used to better reach potential millennial and Gen Z clients through social media.

AI can even deliver personalised marketing based on individual browsing preferences on a large scale, helping optimise customer conversion and retention rates. And since these programs are automated, you just need to set one up and sit back — that is, until the program notifies you about actionable insights based on ad performance. This can help you tweak marketing campaigns to their fullest potential.

It lowers costs

With automation, you'll be freeing up time to do more, passively accomplishing things on a large scale — all with no risk of human error, and for a fraction of the cost. In fact, AI can help reduce overhead costs on the whole.

This is especially crucial following the devastating economic effects of the COVID-19 pandemic. FXCM reports that alongside the rest of the world, the UK economy contracted by 2% in the first quarter of 2020 and slipped a further 20.4% by April last year. Plus, due to relief and stimulus packages, lenders have had to extend payment holidays to their borrowers.

And after finance minister Rishi Sunak passed a tax cut earlier this year, the volume of mortgage applications surged, threatening to prolong transactions. Fortunately, automation helps with filling out paperwork, too. By collecting data on clients, some programs can pre-fill certain documents. This gives the application process a much-needed boost, and means you can accomplish more transactions and payments in a shorter period of time.

It enriches customer experience

But AI can go beyond simple automation. More advanced machine learning software can analyse data and learn from it, making it highly useful to mortgage lenders everywhere.

By continually learning from client behaviour, machine learning's most important contribution to lenders is that it can provide more customised services each time. For instance, Business 2 Community points out that simply placing chatbots on your site can already provide immediate and readily available feedback to potential borrowers, making them more likely to avail of your services.

Down the line, machine learning can also be trained to identify existing clients with ailing financial health, or pinpoint those who are likely to refinance to another lender. By alerting lenders early, they can reach out to clients with relevant financial assistance options. In other words, AI — and machine learning in particular — provides up-to-date guidance at all points of the transaction process, which can go a long way in maximising customer retention and loyalty.

The bottom line

On the whole, AI is an increasingly indispensable tool that helps mortgage lenders provide safe, quick, convenient, and easily understandable services to borrowers. At the same time, AI makes lenders proactive, alerting them to early warning signs, pushing them to constantly improve their services, and helping increase profit margins.

Written by: Sally Summers

Sally Summers is a management consultant based in the UK. In her free time, she loves eating bagels, shopping for vintage clothes, and jogging.