Awards

2018 BAI Global Innovation Award Finalist

BAI Global Innovation Awards 2018 finalist Arion Bank

 

Innovation in Customer Experience

Arion Bank- Iceland
Digital Mortgage Process – From Weeks to Minutes

Simplifying the credit assessment process was an easy decision to make when Arion Bank set out to improve the end-to-end mortgage process. Prior to the redesign of Arion Bank’s mortgage process, the average time was two to three weeks for customers to finalize it. After the customer’s journey redesign, Arion Bank customers finalized and received their credit assessment in three minutes and could get an approval for a loan in only five minutes.

A team within Arion started by mapping the current, old process and created a mock-up of how the new process should look on the second day. The key premise was always how the customer would flow easily through the credit assessment and lending process without having to gather personal documents herself. Establishing connections to third parties such as the Icelandic Tax Authority, eDocument platform and credit score companies were crucial for the credit assessment process. For the lending process, integrating the various systems such as CRM, credit platform, etc., was the complicated part.

The ultimate goal was to have all information and documents flow automatically within and between systems with as little human intervention as possible. The internal process time at the bank was reduced by 50 percent with close to zero risk in documentation error.

The impact has been straightforward. In the first 12 months, the number of mortgages provided increased 33 percent, the amount loaned increased 100 percent and the NPS (Net Promoter Score) for Arion Bank’s mortgage process went from -2 to +32.

Arion team photo

The Problem

Most future homeowners have a single question before they make a purchasing decision: “How much can I afford to pay?” This usually translates into “Can I afford this particular apartment or house?” In order to answer the question, a bank needs to understand the cash flow (salaries), net wealth status (total debt and equity) and credit score of the purchaser. Fetching this information manually is rarely an enjoyable act for a future purchaser of a new home. Collecting the latest salary slips, last year’s tax return, overview of other loans and assets is burdensome and tedious. These ended up being 10-20 documents that had to be brought to the bank for review, appropriate documents may be missing or outdated so a customer had to visit the bank three to five times, not adding to the joy of the customer. On the bank side this process demanded a significant amount of manual work going over all these documents as well as increased pressure in the branches when customers were turning the documents in.

On average, this process used to take two to three weeks with at least 30 minutes spent on each application spread over multiple employees.

Following a positive credit assessment process begins the actual lending process. Before the redesign, the customer filled out forms, the bank’s representatives typed in the information in various systems, presented the loan calculation on paper and needed a written signature on the loan documents themselves. Upon final signature, customers could expect a waiting period of seven days until the loan was paid out to their account of choice.

The bank’s internal process was very time consuming with several places prone to human error, including typos. Same information was also typed in various systems that were not integrated.

The Solution

Redesigning a customer journey starts with the customer. How and what she expects and perceives. Arion bank used its newly created internal innovation hub called “Digital future” that was composed of cross-functional teams. The teams spend 16 weeks focusing on solving one specific problem or process, always with customer success in mind. The redesigned mortgage process is the result of two projects in the accelerator.

Going to the initial drawing board, the Digital Future’s team mapped the current, old process in the first day in the accelerator and already had a mock-up of how the new process should look like on day two. The key premise was always how the customer would flow easily through the credit assessment and lending process without having to gather personal documents herself. Establishing connections to third parties such as the Icelandic Tax Authority (tax return, debt and asset status), eDocument platform (salary slips) and credit score companies were crucial for the credit assessment process. For the lending process, integrating the various systems such as CRM, credit platform, document archives, etc., was the complicated part. The ultimate goal was to have all information and documents flow automatically within and between systems with as little human intervention as possible. The internal process time at the bank was reduced by 50 percent with close to zero risk in documentation error

The Outcome

The impact has been straightforward. In the first 12 months, the number of mortgages provided increased 33 percent, the amount loaned increased 100 percent and the NPS (Net Promoter Score) for Arion Bank’s mortgage process went from -2 to +32.

During the same period, Arion Bank’s main Icelandic competitors’ mortgage volumes have been more or less stagnant. Over 50 percent of the bank’s mortgages are applied for and delivered fully digitally and this number is expected to grow going forward. The number of credit assessments increased with 60 percent between 2016 and 2017 which means that not only Arion Bank’s customers are using the service. Over 90 percent of all credit assessments are performed digitally instead of manually. Since the credit assessment is linked to eIDs (a nation Icelandic ID system), which in turn is related to Icelandic social security numbers, anyone with an eID can use the service and use the result to his or her convenience, even with other financial providers.

All in all, time savings and convenience for customers contribute a great deal to the success of Arion Bank’s mortgage and refinancing process. Another factor is privacy. Attending to the bank’s mortgage process is not limited by banking hours. It can be done in the privacy of one’s home in the evening, which is evidently the most common time of the day when people discuss this important matter. Customers have responded well since going through the first step of apply for a mortgage, credit assessment, is used 45 percent of the time during weekends and evenings.