Revolutionizing the UK Digital Mortgage Market

uk digital mortgage marketplace

There are multiple fintech lenders and marketplaces in the UK dealing in mortgages and other financial products. What sets Nuvo apart is it’s claim to be the first artificial intelligence (AI)-powered digital broker. Launched by Nick Sherratt (heads oversees operations and finance) and Richard Hayes (CEO) 18 months ago, Nuvo fills the gap between traditional […]

uk digital mortgage marketplace

There are multiple fintech lenders and marketplaces in the UK dealing in mortgages and other financial products. What sets Nuvo apart is it’s claim to be the first artificial intelligence (AI)-powered digital broker.

Launched by Nick Sherratt (heads oversees operations and finance) and Richard Hayes (CEO) 18 months ago, Nuvo fills the gap between traditional brokers and established price comparison websites. They had been running their own mortgage brokerage in Macclesfield, Cheshire for a decade, also selling life insurance and income protection. Their experience as a traditional broker helped them understand what was missing in the market. As a result, they’ve made it easier for customers to access the best mortgage offers in less than a minute, once they’ve gained some basic information from the user.

Now Nuvo Works

The focus was on user accessibility and speed of providing quotes. But the platform’s USP is its AI-powered chatbot technology, which helps users chat in real time and suggests the best mortgage products suited to their finances. The platform was established with 1 million GBP in a seed round, and it recently raised 1 million GBP in a second round of funding.

Historically, if a customer wanted advice on mortgages, he would rush toward a broker or any other independent financial advisor and, in turn, the advisor charged a fees for their advice. However, recent research conducted by Nuvo revealed that nearly 40% of Britons rely on their own research once they get a list of prices from comparison websites. But the problem is most comparison sites don’t give the full picture and can’t answer queries accurately. This passive information overload did not really solve the user problem. Thus, Nuvo was born of the need to marry the traditional mortgage broker experience with the convenient of free comparison websites.

Nuvo has digitalized large parts of the mortgage application process through incorporating real-time sourcing. With an emphasis on transparency, customers can put their queries online with the help of a laptop or other mobile device and get an instant response. Instead of collecting data from the customer through a lengthy form, Nuvo provides a platform that allows the customer to provide details to a chatbot. Customers can also opt to chat with a qualified human financial advisor via the website or by booking a telephonic interview. It means the process is a two-way process, so the customer can ask specific questions at any point if there is something they do not understand.

What Artificial Intelligence Brings to the Table

Artificial intelligence and machine learning add substantial value by bridging the data, information, and context gap so that the virtual assistant and its human counterparts can deliver a seamless customer experience. If the platform lacks data, or the customer provides insufficient data, then it implements sentiment analysis to ascertain intent. Sentiment analysis identifies the customer attitude, emotions, and opinions. If the platform feels like customers are unhappy and/or confused, they can quickly add it to their processing and allow the virtual assistant to interact without sacrificing user experience. There is no need on the part of the customer to wait for a response if the virtual assistant is unable to answer a complex question. Nuvo removes the uncertainty and interjects with a human being.

The first version of the product launched was a Facebook chatbot with some basic functionality that helped people find the best deals on mortgages. Soon, Nuvo will launch the new version integrated on their site with a state-of-the-art user interface, better communication technology, and a next-gen interaction process. Nuvo utilizes its access to endpoints for a better user experience. It also ensures that APIs match the products the platform is offering to users.

The platform launched after the review by UK’s regulator, The Competition and Market Authority (CMA), which recommended that customers use a variety of sites for comparing the best deals. But there are no other companies giving real insight into the market and products.

The UK Mortgage Market Has Not Caught Up With Technology

Most digital brokers are startups and not evolved from traditional brokers. Products and prices are changing constantly. Nuvo allows customer to find the most suitable offer by updating information on a daily basis. Customers can see and compare all the options to make sure they are getting the best deal, eliminating the need for a traditional broker. Also, the founders’ traditional brokers’ practice became a competitive advantage for Nuvo as it enables the company to combine domain expertise and knowledge in their aim to better serve customers.

The UK is one of the largest marketplaces for mortgage deals. Habito and Trussle are other startups aiming for a slice of UK’s lucrative mortgage market. But Nuvo is in for the long haul and believes it can achieve a market share of 5%-10% of the online mortgage market in the next five years.

According to Nuvo founders, they have 10,000 more deals on their platform than Habito at this moment. There is an in-house team of financial experts that assist the customer in solving complicated financial decisions at zero cost. Nuvo does not charge fees to customers like traditional brokers. Instead, they get a commission from the insurer or the mortgage provider.

Founder Richard Hayes said, “Millennials are now willing to transact digitally, so we have an opportunity to resonate with anyone who is willing to engage digitally.”

So far, the mortgage sector has not been able to innovate to meet the demands of customers, but Nuvo, with its AI-powered chatbot, is attempting to simplify the on-boarding process. They are also focused on first-time buyers to build trust and confidence in the mortgage ecosystem.

A major tailwind for digital brokers is the slow but steady death of brick-and-mortar mortgage advisors. In 1985, there were over 120k independent financial advisors in the mortgage space, but now it’s under 20k. Correspondingly, there has been a massive increase in people seeking mortgages. This suggests that the market is consolidating and scale will be an important element in winning the sweepstakes.

How Nuvo is Capturing the Future Digital Mortgage Market

“2018 will see a full mortgage journey on our platform,” Hayes said. Nuvo is incorporating new features to speed up the application process and using APIs to enhance the customer experience at large. “We all know that buying a house is a costly and long process.” Thus, the platform assimilates all the information about property such as value, construction details, and more, from different sources to help the customer get the best mortgage deal and insights about the property itself.

The platform is focused on its journey to help borrowers find the best mortgage and other financial products. It is looking to raise further funding to grow aggressively in this massive market space with its proprietary AI technology.

Author:

Written by Heena Dhir.

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Insured p2p investments

Insured p2p investments

Archover provides secured and insured loans to p2p investors. Money is lent to an SME against its account receivables. The debtors act as collateral for the lenders. Additionally, these A/R books are insured with insurance company COFACE, the 2nd largest trade credit insurance company in the world. This means in case there is a default; […]

Insured p2p investments

Archover provides secured and insured loans to p2p investors.

Money is lent to an SME against its account receivables. The debtors act as collateral for the lenders. Additionally, these A/R books are insured with insurance company COFACE, the 2nd largest trade credit insurance company in the world. This means in case there is a default; they can recover the money in a day rather than months. ArchOver is named as joint insured and loss payee. This additional feature of insuring the debtors is unique and will add tremendous value to the platform in the eyes of its investors. Their revenue model is simple. Borrowers pay 4.8% as a marketing fee and the originator also make a 1.5% margin from the spread between what they pay to lenders and what they charge to the borrowers. Thus lenders get over 6% secured returns; borrowers pay up to 8% and the insurance fee.

Borrower demand

The collapse in deposit rates combined with a retreat by banks lending to small businesses left entrepreneurs seeking alternative means of borrowing and investment. Four in ten businesses have their first-time loan applications rejected by banks, and only 55% of businesses see loan applications accepted, according to data by BRDC SME Finance Monitor. ArchOver was established with an aim to help the SMEs get the financing they need to grow and provide investors a truly safe and secure fixed income instrument. They are amongst the first crowd-lending platforms to offer highly competitive loans (7-8.75%) leveraged against the quality of an SME’s customer base.

Company history

ArchOver came into existence in 2013, but they made their first loan in 2014 as they were trying to perfect the business model. Hampden Group is the lead investor behind the peer-to-peer lender and has a 70 percent stake in ArchOver through a subsidiary. Hampden Group has also invested £ 3 million alongside private and institutional clients over the platform founded and led by the Chief Executive Angus Dent. Angus Dent qualified as a Charted Accountant and has helped build a number of technology businesses. In the first quarter of 2015, ArchOver was voted as the fastest growing Crowdfunding website in the UK.

Unique business model: secured and insured.

When somebody applies with ArchOver to borrow money, the experts will review the application and after that, another assessment is done by the experts at COFACE. COFACE does not allow ArchOver to take any borderline loans; there are only very high-quality debtors in the loan books. Ensuring each loan individually was costing ArchOver a fortune .So in the beginning of this year, they bought £115 million worth of credit insurance from COFACE and in the process were able to reduce the cost of insurance to borrowers. Premium paid by the borrowers now is relatively insignificant as compared to what they were paying before.

The average size of the loan is £100,000 to £300,000 with tenure ranging from 3 to 36 months. They have completed 81 loans worth over £17 million till today and are expected to cross £20 million this year. The biggest and the most noteworthy loan done by ArchOver recently is when they raised £2.3 million for a Scottish company called Duradiamond. It is believed to be the largest non-property related working capital facility ever raised by any platform anywhere in the world. The company is focussing on crowd-lending because it wanted to capitalize on the paucity of secure investment opportunities for potential lenders. The minimum investment has been kept at 1000 GBP to invite only serious investors without setting such a high limit to dissuade them from trying a new platform. It has 75 individual, 7 family offices and a couple of financial institutions as lenders on the platform.

Borrower profile

Usually, the borrower ranges from a variety of sectors. The majority of money is going into engineering and industrial businesses in midlands. ArchOver is a team of 16 people that focuses on UK market alone, with the possibility of expanding in future. Word of mouth, brand awareness, publicity, and finance brokers are the avenues used by ArchOver to find borrowers. They are trying to introduce a multi-currency aspect to their portfolio. The start-up is trying to structure the requirement of investors lending to UK businesses but receiving their payments in a different currency. This would help them expand their horizon of investors outside of UK.

SME lending

Roughly 7 percent of everyday investors are already using P2P platforms.  Investments in smaller businesses grew by 43% in the year 2015 and the alternative finance sector saw business lending increase by 75% to £1.26 billion in 2015. KPMG estimated that in 2015 online alternative finance platforms provided the equivalent of over 3% of all lending to SMEs (small and medium-sized enterprises) in the UK. For small businesses – those with a turnover of less than £1 million a year – P2P platforms provided an amount lending equivalent of 13% of all new bank loans. SME lending in general and lending against invoices, in particular, has exploded across US and UK.  Alternative lenders are at the forefront of the process with their innovative business models and ability to match investors and SMEs. Archover has brought a very important twist to the model with its COFACE partnership. This is evident from the fact that the company has had not a single default till now. The important question is whether this insurance element can be incorporated by other marketplace lenders? Though the insurance element might be replicable, the company has a golden opportunity to ramp up the business to become the originator of choice for lenders. Aggressive fundraising via the parent Hampden group or through external investors is necessary to ensure that the first mover’s advantage is not lost.

Author: Heena Dhir and George Popescu

George Popescu

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