Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- The absence of on-demand access to accurate property data and lack of standards for seamless data sharing among various stakeholders have led to a tedious mortgage process in the UK.
- To improve the mortgage customer experience, the UK government plans to digitise property data and make it accessible through digital channels.
- While digitisation is the first step in rationalising the management of property data, setting up a central data repository with seamless access to all stakeholders will speed up the mortgage process.
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Homebuying in the United Kingdom
Homebuying should be quick, transparent, safe, secure, and most importantly, stress-free for the buyer.
However, this is often not the case in the UK. Once prospective homeowners identify the property, they approach a bank or a building society for a loan. To avail a mortgage loan in the UK, borrowers need to submit a variety of documents and property data, and gathering all this data can be time-consuming. This is because property data in the UK is dispersed across various organisations such as government bodies, surveyors, and local councils. Moreover, a majority of this data is in physical form and requires manual verification. In addition, property attributes need to be sourced from conveyancers, insurers, credit bureaus, and solicitors, among others. Coordinating with multiple entities to gather and verify property data is not easy, leading to lengthy approval cycle times, higher costs, and poor customer experience.
To improve the homebuying experience, the UK Government recently announced measures to streamline the process of buying and selling homes. Plans are afoot to digitise property data and make information digitally accessible. While digitisation is the first step, establishing a central repository to house data from multiple sources and making it easily accessible to all the stakeholders in the mortgage ecosystem will help mitigate these challenges and greatly ease the mortgage process.
We envision the creation of an open property data platform built using distributed ledger technologies (DLT) or blockchain systems. Blockchain has the ability to store data, while ensuring permanent, tamper-proof record of ownership for properties and lands. The system has the capability to enable smooth and seamless exchange of data among all the stakeholders in the ecosystem.
Property data management needs a rethink
The millions of homeowners in the UK reach out to banks and building societies for mortgage loans to buy a new property or remortgage existing ones.
Most of these loans are short-term, which means homeowners as well as prospective buyers are forced to remortgage either with the same lender or a new one within a few years of buying the property. Furthermore, multiple stakeholders operate in the UK mortgage ecosystem and process a plethora of property attributes for a variety of purposes. These attributes can include details pertaining to the type of property, purpose, value, ownership, legal status, taxes, insurance and so on.
Let us examine the challenges in more detail.
Data volume: Millions of properties, each having over 50 attributes generate huge volumes of data across systems.
Changing: Several aspects such as change in ownership, increase in taxes and insurance premium, or legal disputes affect the data attributes.
Multiple data formats: Property data is stored and exchanged in multiple formats. Additionally, data can be both structured and unstructured such as images which then need to be converted, mapped, and stored in standard format for further processing.
Data mapping: Mapping and converting unstructured data to a specific format is time-consuming and error-prone. Lack of standardisation across various stakeholders results in each player storing data in a different format, which further complicates the situation.
Discrepancies in data: The same property data is stored in different places, and because it is not updated in real time, it often reflects different values. For instance, data on property tax, insurance premium, lien information, valuation, ownership details and so on are stored by many stakeholders, and this data may vary across systems.
Missing or incorrect data: If property data is missing or the attributes are erroneous, it can impact its ownership, valuation, risk factor, and hence can make the entire mortgage transaction incorrect or even non-compliant.
Multiple stakeholders: Lenders, both banks and building societies, currently work with various stakeholders (see Figure 1) in the ecosystem to access property data. This is time-consuming, expensive, and also error-prone.
Figure 1: Stakeholders involved in the property data chain
Enter open property data platform
An open property data platform will accelerate the homebuying process.
The platform will serve as a central repository of property information, which can be updated in real time and accessed by all the stakeholders in the ecosystem, on demand and without incurring costs. This will involve gathering all the property data, converting it into a standard digital format, and ensuring reuse and sharing via open standards (see Figure 2). As a result, all the stakeholders can seamlessly connect with the central repository both to provide and access accurate and consistent property data in real time. This initiative can lead to the creation of a common data taxonomy or dictionary, a standard method to assign and use property attributes.
Figure 2: A blockchain based open property data platform
A single, golden source of property data will be a boon for banks and building societies given the benefits of shorter cycle time, lower costs, enhanced efficiency. Additionally, it will eliminate superfluous or repetitive processes that currently plague the UK mortgage system.
To function efficiently, an open property data platform must be underpinned by a decentralised architecture that ensures complete transparency, immutability, traceability of real time data exchange, and reduced costs. Distributed ledger technology (DLT) or blockchain is the perfect candidate to meet all the above requirements. A DLT-backed property data repository will allow on-demand access to real time data to all the stakeholders, greatly reducing the mortgage approval cycle time in the UK.
As this concept involves all the stakeholders in the ecosystem, it cannot be established by a single entity. Setting up a common industry body committed to meeting the requirements of all the stakeholders is the ideal approach. To be successful, this initiative will require banks, building societies, insurers, conveyancers, property valuers, and other stakeholders to invest and collaborate with the industry body. Such an entity must work with ecosystem stakeholders to define a common framework in compliance with regulations to ensure unbiased functioning. In addition, all the stakeholders must arrive at a consensus on standards and rules that will govern data exchange. Banks, building societies, and other players will need to collaborate with each other and navigate some key steps across various dimensions such as technology, access, governance, as well as data update and exchange to successfully set up the open property data platform.
- Establish a distributed ledger.
- Define access privileges for all the stakeholders based on roles and responsibilities.
- Ensure auditability of access privileges provided to stakeholders.
- Lay down data update frequency and standards for all the stakeholders.
- Set up a system to send automated reminders or alerts to all the stakeholders to update data.
- Define triggers for data update for all the stakeholders; for example lenders must update loan and lien details as and when loans are sanctioned or repaid. Similarly, conveyancers, appraisers and valuers, solicitors, property agents, councils, tax departments, insurers, among others must update data in the repository whenever there is a change in the status of the property or the borrower.
- Establish a standard format for the exchange of property data; the standard adopted must be capable of being mapped to any loan origination or servicing system.
- Ensure seamless data exchange without the need to connect with multiple systems or application programming interfaces (APIs).
- Run algorithms dynamically, as and when new data arrives, so that up-to-date data is available in real time.
The way forward
Absence of a common standard for data sharing as well as lack of access to accurate, consistent data are the primary causes of delays in homebuying.
Establishing an open property data platform that serves as a central repository of digitised property information will usher in a paradigm shift in how ecosystem players share, access, and use data and enable a richer, customer-centric mortgage process. Furthermore, it will also help in realising the complete potential of property information.
With the UK government’s commitment to streamlining the mortgage process, converting the art of the possible into reality is no longer a remote dream but a goal well within reach. For banks and building societies, investing time and resources to establish an open property data platform is a win-win as also for all other stakeholders in the ecosystem. Mortgage lenders must take steps to operationalise the platform in collaboration with other players, while this exercise will involve a great deal of complexity, the rewards will far outweigh the effort.
