The rise of digital secured loans

By Michael Biemann, Founder & CEO at Selina Finance

Over the last two decades, digital solutions have sparked revolutions across industries, creating immense value for consumers in the process. Not all areas have kept pace with opportunities that new technology unlocks, and nowhere is this more true than in financial services, and the secured loan sector specifically.

Until today, the mortgage process has been tedious, paper-based, and far too lengthy for customers, with average waiting times at a bank branch of 3 weeks. Mortgage applications are inherently complex processes, requiring multiple touchpoints, numerous stages of compliance, and the potential for many things to go wrong. These obstacles have deterred traditional lenders from investing in advancements, who for the most part have been perfectly content with the status quo.

There have been some efforts - in 2018, RBS/NatWest proudly introduced “the UKs first paperless mortgage”, claiming to have been a huge success. However, rather than really putting the consumer in the centre, high street banks think about process improvement from their end in an effort to cut operational costs and are stuck in legacy IT systems which don’t allow them to innovate with a fresh mind.

At Selina Finance, we are taking a different route – starting from a blank slate and radically re-thinking the way a mortgage works, which means stripping down all aspects and features in the mortgage process to find out what customers really need. 

Advances in technology have unlocked the next wave in the FinTech revolution – mortgages Challenger banks have shown traditional high street banks that opening a bank account does not need to be difficult. Whereas high street banks consider taking 2 months to open a business account as good form, challenger banks have managed to reduce that time to as little as 5 minutes.

And now these same customer demands for speed and ease have finally reached mortgages – where the revolution is just beginning:

• KYC and AML processes can be easily done online – for the borrower it requires not much more than taking a selfie on their phone.
• Document processing is radically simplified by OCR (optical character recognition) technology which allows automatically scanning of structured documents such as financial statements, redemption statements and standardized forms.
• Wet ink signatures are now a thing of the past, as transactions are increasingly taking place online through e-signature providers. There are numerous players paving the way, most notably DocuSign which is used not only at Selina Finance, but also at innovative industry leaders in other areas such as Salesforce and Stripe.
• Even affordability assessment and credit scores are now easily automated through the innovation happening in the open banking sector. The open banking initiative was perfectly timed to take advantage of the immense progress that is being made in machine learning, big data and artificial intelligence. Automated processing in this sector has two major advantages: privacy is conserved for the customer as lenders get aggregated outputs rather than browsing through bank statements manually, and lenders get actionable insights through a standardized assessment on a granular level.

At Selina Finance, we do not think that technology should be an end in itself, but it does provide the foundation for offering better solutions to customers. Technology helps us streamline origination and loan management processes, which in turn enable us to cut origination and early repayment fees completely. And crucially, it also enables us to eliminate most of the frustration, time, and money spent by customers in the mortgage process.