This article was originally written in November but has never been published. I recently remembered its existence and applied a few minor changes.

I have to admit I was quite surprised when I was asked to share my vision about the mortgage sector. Not because I don’t like writing or because finance bores me, I was surprised because I am a novice when it comes to financial services. Most of my experience stems from a few conferences, reading articles in the financial newspaper and industry magazines and hearing dad’s loving words about his sector over dinner. After my first real encounter with the sector at am:hypotheken I realized that I was actually really interested in the financial services sector and started exploring it further. The thing that pulled me in weren’t so much the day to day activities in financial services but rather the huge transformation that is happening right now.

I like to draw parallels between concepts to illustrate my thoughts and feelings so I did just that. I see a great deal of similarity between the current state of the mortgage sector and the taxi sector a couple years ago. A lot of rules and regulation, a limited threat of substitutes and a homogenous product with little to no innovations or changes. However, there is one major characteristic that sets the two apart: the taxi industry did not see the need to change until Uber forcefully shoved it down their throats. The mortgage sector realizes it needs to adapt in order to survive but struggles with the practical implantation of that thought. I am by no means qualified to give advice about how to handle this oncoming transformation but what I can do is share my vision on the mortgage industry and the changes I expect to see with the help of a few marketing theories.

My first observation is the existence of a gigantic blue ocean with a very limited selection of parties willing to dive into it. This blue ocean contains a group of consumers who would like to use purely digital advice. It’s only a matter of time before a concept shows up that appeals to this segment but the main question is where that concept will come from. Looking at the taxi industry once more: Uber was founded by outsiders, will history repeat itself in the mortgage industry?

The second development I expect to see is a further division of the landscape through unbundling of business models. Activities such as intake and brokering will become less attractive over time because of digitalization and the ban on commissions. My expectation is that these activities will be outsourced or halted altogether. This remodeling of the market will enable each party to focus on a smaller set of activities. Establishing focus has beneficial effects on the quality of provided services which may indirectly contribute to restoring consumer’s trust.

I couldn’t resist hiding some advice in my third expectation: I took the liberty of assigning a value discipline from Treacy and Wiersema’s model to each party with the purpose of illustrating the aforementioned focus. Product leadership is a logical choice for the providers of digital advice while execution-only parties and service providers are cut out for operational excellence. This last value discipline can only be obtained, however, if mortgage providers speed up their end of the process. Banks in particular are notorious entities in the whole process. If they do not manage to accomplish significant improvements the whole chain will still suffer badly from its weakest link.

Intermediaries will be able to divert their full attention to the segment that feels the need for human interaction somewhere down the line in their search for a mortgage. This means they will have to live and breathe customer intimacy in order to compete. During my search for information I stumbled upon a paper about the relation between consumers and providers of financial services. The paper contained a graph about the different influential factors when choosing an intermediary. I was quite surprised to say the least when I discovered that word-of-mouth advertising is virtually the only deciding factor. At first glance this may seem like a troublesome conclusion but in my opinion it is a golden opportunity. It means that pricey activities such as advertising are not as important as once thought. Of course it has some use but there is money to be saved if this is a high cost item for an organization. There is also a small paradox hidden in this finding: the most efficient way of acquiring customers appears to be simply retaining and satisfying existing customers.

In conclusion, I have observed three major challenges for the Dutch mortgage industry: embracing digitalization, applying focus and restoring consumer trust. I don’t think the last two challenges will be that hard to overcome but I am slightly worried about the fear of digitalization. From where I’m standing, digitalization is not a threat but a great opportunity. It only becomes a threat when ignored.