Comment: AI has a part to play in the mortgage world

By Mark Lusted

Aug 23, 2018

Artificial Intelligence is a phrase on most people’s lips in 2018, with bold predictions being made about its potential to disrupt many industries, including financial services.

Mortgage brokers and lenders alike have been grappling with how to unlock the power of AI. But outside of the hype, what is the current reality? And should you be thinking about how you can apply it to your business?

Before we get to that, let’s pause to consider terminology. Words like robo, AI, chatbots and machine learning are often used interchangeably when they actually mean different things.

AI is typically defined as the ability of a machine to perform cognitive functions that we associate with human minds: perceiving, reasoning, learning, interacting with the environment, problem solving and exercising creativity.

Machine learning is a subset of AI. These are algorithms that detect patterns and learn how to make predictions and recommendations by processing data and experiences, rather than by receiving explicit programming instruction. The algorithms also adapt in response to new data and experiences to improve their performance over time.

Chatbots are interfaces that simulate human conversation, enabling the use of conversational language instead of a traditional website form. These can allow you to choose from either free form text conversations or scripted options.

So how can these be applied to the mortgage industry?

The first wave of innovation in recent years has been focused on digitising and automating the advice process. You will no doubt have read many articles predicting the death of traditional mortgage advice, and the rise of AI-robo advice, in the coming years. But while the new challenger digital mortgage platforms have undoubtedly offered improved digital user experience and an element of self-service, in reality they are not being powered by AI.

Moreover, there are large challenges for the mortgage industry adopting AI-driven robo advice, leaving aside the regulatory complexities. The concept of robo advice originated from wealth management and has been highly successful at managing liquid assets – a world away from mortgages.

We believe that most borrowers will value human advice long in to the future. The next wave of innovation will be focused on automating the manual tasks brokers still face, freeing up more of their time to spend giving actual advice.

AI will undoubtedly have a part to play (for brokers, lenders and servicers) as the technology is moving fast and the barriers to entry are becoming lower. Companies like Microsoft and Google are making their AI services available to developers, and businesses, so if you are not looking at how your company could leverage this technology, your competitors may be.

Mark Lusted is managing director of Dock 9

Mortgage Strategy

Mortgage Strategy is the leading source of news, analysis and insight for mortgage brokers and intermediaries within the UK. In print and online Mortgage Strategy delivers the complete picture on key issues affecting mortgage specialists, from identifying key lenders in the adverse credit sector to analysing the impact of a potential recession on the housing market, through detailed interviews with lenders, independent commentators and other mortgage specialists. Independent studies show that Mortgage Strategy is by far the leading and most valued brand in the market, with 75% of brokers naming Mortgage Strategy as their preferred magazine to keep them up to date on developments within the industry.

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