David Gwyther, Business Development Director at Butterfield Mortgages Limited, explores how trust can be built with HNWIs in the "new normal", and why tech alone may not cut it.
The financial services sector is undergoing an important – and what some might say “long overdue” – transformation. The sudden onset of COVID-19 has forced high street banks through to specialist mortgage providers and alternative lenders to adapt to a new set of circumstances few would have anticipated.
Social distancing measures have forced the majority of these organisations to work remotely and this has provided its own set of challenges. In one respect, they have had to ensure the appropriate systems and processes are in place so that their employees can carry out their same roles and functions outside of the office. This has meant putting new systems and processes in place, including the adoption of digital tools.
As part of adapting to the “new normal”, another ongoing challenge has been reactively responding to the needs of their existing clients and the wider market. Again, this has proved difficult for some. Recent research by Butterfield Mortgages Limited (BML) revealed that 19% of homeowners had “lost faith” in their bank due to “poor support” it provided during the coronavirus. On top of this, one in four (25%) feel as though their banks have not been proactive in providing financial advice.
With the UK tightening lockdown measures in a bid to contain a spike in coronavirus infections, it is clear that remote working and social distancing will remain the norm for the foreseeable future. Naturally, the financial services sector will need to question whether they methods they are currently relying upon to engage with their customers will be effective in the long term.
While COVID-19 has had a positive impact in so far as forcing large institutions to review traditional (and outdated) practices, there has been an assumption that technology naturally provides the answer. In some respects, I do agree with this proposition. However, when it comes to engaging with certain types of clients and networks, I believe that relying on digital adoption too much could in fact damage relationships.
Naturally, the financial services sector will need to question whether they methods they are currently relying upon to engage with their customers will be effective in the long term.
Understanding the principles of effective client engagement
Working in the UK’s prime property market, I regularly deal with the needs and interests of high net worth individuals (HNWIs) interested in high-end real estate. The profile of this client can range from a non-UK resident seeking a property in prime central London (PCL) as a buy-to-let investment to a domestic buyer seeking a primary residence.
As someone who has worked closely with HNWIs and the brokers who represent them, it is clear to me that there is a certain way of engaging with this type of client. Given the size of the financial portfolios, their unique income structures and wealth management needs, HNWIs will only work with financial service providers they trust. Establishing this trust and confidence is a long-term outcome that requires effective client engagement. In other words, financial providers need to demonstrate their expertise and ability to effectively cater to the needs of HNWIs, all the while developing a personal and transparent relationship.
In my mind, this is the ultimate objective of any organisation seeking to engage with the wealth and ultra-wealthy. Before the COVID-19 pandemic, professional and social networking events, conferences and physical meetings proved to be the most effective avenues of communication. As we all know, the coronavirus means the majority of these events have been put on hold. Some have been held online and while they have proved to be a useful solution, I only see this as a temporary measure.
A similar observation can be made when it comes to video conferencing. While no doubt an effective measure in overcoming the obstacles posed by social distancing, this is not likely to totally replace physical interactions with clients. Many in my sector agree that there is something vitally important when physically engaging with HNWIs. Building trust and in turn future client networks is not something that can be achieved by digital communication. That’s why we should not see technology as a tool to be used to build effective relationships.
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The future of client engagement in the financial services
Drawing from the aforementioned BML survey, there was another interesting finding worth mentioning. We found that 31% of homebuyers and homeowners were frustrated by the ways their banks depend on chatbots and automated services. What this shows is that while tech is important, the financial services sector should not overlook the value of physical interactions with their clients.
These are important observations that need to be fully appreciated by the sector so that it can manage the current and future needs of the market. After all, once the COVID-19 pandemic finally subsides, we should expect to see the return of professional networking events and physical meetings.
Yes, there will be a greater reliance on technology to carry out certain communication roles. However, those based place to meet the future demands of the market will be those who have integrated technology as part of a client engagement strategy focused on building trust, confidence and longstanding relationships. This is extremely vital when dealing with the needs of HNWIs.
Karoline Gore gives Finance Monthly an overview of promising Candian fintechs to look out for.
With the rest of the world sprinting toward the inclusivity and diversity of fintech, Canada is catching up swiftly. It is the inclusivity of cashless transactions and peer-to-peer lending, in particular, that are catching the attention of the Canadian market. So it isn’t surprising that Canadian fintech is now attracting a rather diverse age demographic with 46% of them being over the age of 40, according to TransUnion Canada.
In response to this growing demographic, Canadian fintech companies are rolling out some very exciting developments. So which companies are making a splash, and how?
Talem Health Analytics and Ownest Financial
Two Canadian fintech companies are front and center in Holt FinTech Accelerator’s 2020 Cohort list. Talem Health Analytics, based in Nova Scotia, has helped insurers streamline data and empowered them to detect and avoid fraudulent attempts through their AI injury causation tool. They also help insurance firms map out rather accurate recovery trajectories so they can better develop plans to suit their clients. The Calgary-based Ownest Financial that cut down the internal processing time of their partner lenders by 90%. They partnered up with 125 Canadian lender companies to give consumers an easier time to shop around for mortgages, personal loans, and even car financing, to mention a few. They also boast that their clients need about 70% less paperwork, making the whole lending experience swifter and less complicated.
MindBridge’s AI Reducing Financial Risk
Surprisingly, only 45% of consumers feel confident that they can spot and identify errors in financial statements before turning them into reports, according to the Association of Certified Fraud Examiners. The Canadian fintech MindBridge has developed an AI that rapidly scans and identifies anomalies in financial statements and reports. This helps organizations and consumers reduce their financial risk and avoid damaging credit scores. MindBridge’s AI is effectively transforming how accounting can be done, streamlining the auditing process, and improving financial management for businesses and their owners, and private consumers.
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AptPay’s Faster Cash Disbursement
The Canadian fintech AptPay is making a splash in the UK. They’ve partnered up with Mastercard to facilitate an accelerated cash disbursement processing for businesses in various industries and sectors. It is through AptPay’s Application Programming Interface (API), that companies and businesses can integrate Mastercard Send to start payouts. Through AptPay’s compliance services, businesses and their employees can be assured that their transactions are secure and are compliant with the rules set for their particular industries. The API will also enable real-time digital payments that can be linked to banks. The best feature is that payments can be rejected, approved, and reversed by recipients—so they are not simply inert in the whole process.
As consumers and businesses are fully realizing the convenience, inclusivity, and safety of cashless transactions, it is the job of fintech companies to provide better services and processes. Thankfully, Canadian fintech is paying attention and is setting its own trends through its developments and initiatives. The coming months will be a truly exciting time for Canadian fintech and consumers should pay attention.
The Financial Conduct Authority (FCA) has announced that it will extend payment holidays on credit cards, personal loans, pawnbroking and motor finance to support borrowers affected by the COVID-19 pandemic.
Consumer credit customers who have not yet had a payment deferral under the FCA’s July guidance may request one that will last for up to six months, the UK regulator said in its release. At the same time, borrowers who have already had one deferral will be allowed to apply for a second.
“We will work with trade bodies and lenders on how to implement these proposals as quickly as possible, and will make another announcement shortly,” the FCA said, adding that lenders would soon provide further information on what this will mean, and that consumer credit customers should not contact their lenders yet.
Mortgage payment holidays, which had been slated to end in the UK on 31 October, will also be extended under much the same conditions. Borrowers who have not yet had a payment deferral will be allowed to request one that will last for up to six months. Borrowers who already have a deferral can extend it to a maximum of six months.
The FCA warned: “It may also be in the interests of mortgage borrowers who expect to have long-term financial difficulties to agree other forms of tailored support with their lender.”
The regulator’s new guidance comes ahead of an England-wide lockdown that will come into effect on Thursday and last for a month, ending on 2 December, in an effort to curtail the second wave of COVID-19 infections. Non-essential retailers and hospitality services will be closed, and travel will be subjected to further restrictions.
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However, educational facilities such as schools and colleges will be kept open.
“We’re not going back to the full-scale lockdown of March and April. The measures that I’ve outlined are far less primitive and less restrictive,” said prime minister Boris Johnson on Saturday. “Though, I’m afraid, from Thursday, the basic message is the same: Stay at home, protect the NHS, and save lives.”
Alpa Bhakta, CEO of Butterfield Mortgages Limited, explores how large and small banks have responded to the disruption caused by the pandemic and how it is likely to shape the future of the sector.
No business or sector is immune to the impact COVID-19 has been having on society. Not only are there the immediate health implications to deal with; the introduction of lockdown measures and social distancing has completely transformed the way businesses, investors and consumers interact with one another.
There is a general acceptance that, regardless of how or when the COVID-19 pandemic is effectively contained, the changes brought about by the virus will be permanent. From flexible working patterns to the adoption of digital processes that reduce the need for physical interactions, businesses are slowly transitioning to what is now being termed as the “new normal”.
Of all the sectors adapting to the new normal, one could argue the financial services sector faces some of the biggest obstacles. Historically, large financial institutions have naturally relied on traditional practices and have been slow to embrace change. This is partly due to their size and the natural time it takes to reorganise teams, install new systems and pass the necessary due diligence checks.
Adapting to lockdown: how did banks perform?
The sudden rise of COVID-19 cases caught many of these organisations by surprise. When lockdown measures were announced by the UK Government back in March 2020, these companies were faced with the following challenges.
The first was overcoming the logistical hurdles involved in managing a company when the vast majority of employees were working from home. Unlike small, specialised businesses who were able to adapt to this new environment, big banks had to ensure the necessary systems and protocols were in place in order to continue operating whilst managing risks appropriately.
The second challenge was reviewing the current products and services on offer and deciding which needed to be temporarily withdrawn from the market. If we look at mortgages, the majority of high street banks decided to stop offering high LTV products. Others refused to process new applications, with stringent application checks put in place.
Unlike small, specialised businesses who were able to adapt to this new environment, big banks had to ensure the necessary systems and protocols were in place in order to continue operating whilst managing risks appropriately.
The decision to pull certain mortgage products from the market makes sense, particularly at a time when it was not known when social distancing would be eased. However, this also had a significant impact on homebuyers.
A survey of 1,300 homeowners and prospective homebuyers by Butterfield Mortgages Limited (BML) in late May revealed that over half of homebuyers had been denied a mortgage this year. This is despite having agreements in principle. Of those we surveyed, three in ten, or 31%, said they had lost their deposit due to delays in securing a mortgage as a result of the coronavirus.
These statistics are startling and bring me to the third and final challenge banks are indeed continuing to face. That is effectively engaging and supporting their clients so that these customers are in a position to confidently manage their finances and make significant investment decisions.
Responding to the changing needs of the market
Banks cannot afford to overlook the importance of effective customer engagement. After all, it is in these uncertain times that people are eagerly looking for advice and support. And based on separate research conducted by BML in the summer, it is apparent that some are not satisfied with their banks handling of the pandemic.
Indeed, some 19% of homeowners have lost faith in their banks this year because of the lack of financial support available during the pandemic. This is a concerning statistic and could signal the beginning of a bigger confidence crisis if not effectively addressed. What’s more, just under a third (31%) of customers said they were frustrated by their banks’ dependence on chatbots and automated services.
This is an interesting finding. At a time when people are more inclined to use digital services, it shows that banks cannot simply rely on a chatbot to meet demands for financial advice. In other words, banks need to see technology as an instrument that can be creatively leveraged to engage with their clients and networks. It is not a solution in of itself; rather a tool that will only be effective if part of a larger communication strategy.
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Customer engagement is key
Over six months since lockdown measures were first introduced, it looks as though the country could be facing a new wave of social distancing regulations. This is without doubt a frustrating development. The UK Government has been actively trying to encourage spending and investment activity through targeted policies, and banks have been slowly putting products back on the market.
Regardless of what lies on the horizon, banks need to ensure they are doing everything possible to engage with their clients. This means creatively adapting to the new normal and not letting the other challenges they face overshadow their customer engagement. Failing this, they could risk losing customers in the long-term.
JPMorgan Chase & Co announced on Thursday that it would commit $30 billion to address racial wealth disparity in the US over the next five years, marking one of the largest corporate pledges towards racial equality since the death of George Floyd earlier this year.
The bank’s new initiative aims to provide $8 billion in new mortgages for Black and Latino borrowers, $14 billion in loans and investments to drive affordable housing projects, $2 billion in small business loans and $2 billion in philanthropy. It will also dedicate another $4 billion towards helping 20,000 Black and Latino customers lower their mortgage payments, which will involve grants for down payments and closing costs.
JPMorgan will also spend an additional $750 million with its Black and Latino suppliers and commit to opening branches in low-to-moderate income communities, giving a further 1 million people in underserved areas access to low-cost bank accounts.
“Systemic racism is a tragic part of America's history," said JPMorgan CEO Jamie Dimon in a statement. "We can do more and do better to break down systems that have propagated racism and widespread economic inequality, especially for Black and Latinx people. It's long past time that society addresses racial inequities in a more tangible, meaningful way."
To address racial inequality in its own 250,000-strong workforce, JPMorgan has stated that it will incorporate diversity targets into compensation decisions for managers.
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Organisations across the financial services sector have made pledges to furthering racial equity after the death of George Floyd in police custody sparked widespread protests in the US. Last month, Mastercard committed $500 million to a range of initiatives aimed at increasing financial inclusion among black communities in America. Bank of America and Citigroup have made pledges of their own, totalling around $1 billion each.
JPMorgan is the largest US bank by assets and made a profit of $36.4 billion in 2019.
UK property prices jumped by 7.3% year-on-year during September, with lender Halifax also reporting in its latest House Price Index that mortgage applications have reached a 12-year high.
Halifax’s figures showed that the average price of a residential home reached £249,870 in September, a 1.6% rise from August. This brought the annual growth rate to 7.3%, the fastest observed since June 2016, beating analysts’ predictions of 0.6% monthly growth.
“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May,” said Russell Galley, managing director at Halifax. “Across the last three months, we have received more mortgage applications from both first-time buyers and home movers than anytime since 2008.”
However, Galley also warned of “significant downward pressure” that would be placed on house prices in the months to come as the housing market will eventually be dampened by the UK’s economic downturn.
“It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. The release of pent up demand and indeed the stamp duty holiday can only be temporary fillips and their impact will inevitably start to wane,” he said.
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The “pent up demand” of prospective house buyers has been widely credited for the resurgence of property sales since March and April, when house viewings and moves were banned under COVID-19 lockdown measures.
It is likely that the housing boom will be weakened by the reimposition of strict lockdown rules in several parts of the UK, and by the ending of several of the government’s employment support measures at the end of October.
Mortgage approvals in the UK reached their highest level in 13 years during August, according to new data from the Bank of England.
In its Money and Credit statistical release on Tuesday, the BoE said that the number of mortgage approvals “increased sharply to 84,700” during August, the highest monthly figure seen since October 2007, on the verge of the financial crisis.
The figure far exceeded analysts’ forecasts. A panel of City of London economists had expected to see only 71,000 approvals in the release.
However, other figures showed that consumer borrowing – an important driver of economic growth – increased by only £300 million between July and August, far below analysts’ median forecast of a £1.45 billion increase.
Pantheon Macroeconomics’ chief UK economist, Samuel Tombs, attributed the spike in mortgage approvals to “the release of pent-up demand following the shutdown of the housing market in Q2 and the impetus to complete purchases while the threshold for stamp duty has been raised temporarily to £500,000, from £125,000.”
The UK government’s stamp duty discount, instated in July, will run until March 2021, and record low interest rates (which could even turn negative in the near future) have helped to make borrowing cheaper.
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HM Treasury also noted last week that house sales spiked by over 15% during August following changes in the UK mortgage market.
The COVID-19 pandemic, which is still ongoing, will no doubt have a profound impact on the world's economy for several months at minimum. Additionally, 2020 is an election year in the US, an event whose outcome could also have a powerful effect on a whole host of financial situations, like the unemployment rate, inflation, gross domestic growth, and more. How can you take all these factors into account to create a realistic, accurate personal budget? For starters, it makes sense to build as detailed a budget as possible, make saving a habit, file tax returns as soon as possible, and take defensive investment positions to protect against what will likely be a volatile year for the stock market. Here are four realistic ways to get your financial life in order before 2021 arrives.
Set a Savings Percentage, Not an Amount
Consider selecting a one-digit number as your regular savings percentage each payday. Too many people focus on amounts, which can be misleading and lock you into an outsize amount when your paycheck size varies. Instead, decide to put aside 5%, for example, out of each cheque you receive and you'll be better able to stick with the plan for the long run.
Get Your Budget in Order
Know what lies ahead, especially if you plan to make any changes to your monthly expenses like purchasing a home, renting an apartment, buying a car, or taking out a student loan. The point of budgeting is not always to minimise expenses; it's simply to identify where money comes from and where it goes. After doing that, and only after doing it, will you be able to manipulate various elements of the income and outflow.
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Step one is to know what you have and what you spend each month. For example, an excellent way to plan for education borrowing is to use a student loan repayment calculator for estimating monthly payments. That way, there's no guesswork about what your obligation will be, and you'll be fully able to place the item student loan payment onto its proper line in the budget. Go through each of the ways you spend money and make sure there's an entry for each one. Many people fail at budgeting not because they spend too much but simply because they don't know how much they spend and lose track of their overall finances.
Get Your Tax Refund as Quickly as Possible
If you have money coming to you after you file your tax return, send the forms in via an e-file program as early as possible. That way, you could have the cash by February. If you plan to owe money to the government, wait until the official filing deadline, or a few days before, to file and pay.
Use Metals to Hedge for a Volatile Year
For numerous reasons, 2021 could be a roller-coaster year for the stock market. That's a good reason to purchase silver and gold as a hedge against market uncertainty and potential inflation. Be careful not to put your entire portfolio into metals, but only about 10%.
Halifax’s house price index, released on Monday, revealed that the average UK property sold for £245,747 during August, the highest level since records began.
The widely followed index recorded a 1.6% increase on house prices in July and a 5.2% annual rise. This figure fell below analysts’ expected 6% year-on-year increase.
The UK has seen a house price boom in recent months, following the imposition of a stamp duty holiday on home purchases below £500,000 in England Northern Ireland which came into effect in early July. Lockdown measures in the wake of the COVID-19 pandemic also drove many first-time buyers to delay their search for a home, leading to a swell of demand as lockdown restrictions eased.
Halifax noted this demand surge in its release. “A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty,” the lender wrote.
However, Halifax also warned that the price increase will likely be curtailed soon: "Notwithstanding the various positive factors supporting the market in the short-term, it remains highly unlikely that this level of price inflation will be sustained.”
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Nationwide, a rival lender to Halifax, released its own figures last week that showed prices at record highs in August. According to Nationwide’s data, prices rose by 2% between July and August, and 3.7% from the same period last year.
Tiba Raja, Director at Market Financial Solutions, offers Finance Monthly her insight into the pandemic's impact on the lending market.
Economists and politicians are currently grappling with the question of how to bring about a post-pandemic economic recovery for the UK. So far, the government has introduced policies to stimulate investment, productivity and economic growth to this end. While these reforms have delivered measured success, more works need to be done. Businesses need to take a step back and understand how the pandemic has affected their respective industries.
This is particularly important when it comes to the lending market. Any attempt to support the economic recovery of the UK must include measures that support property investment. For this reason, I have listed below what I see as the three main ways COVID-19 has affected the lending market.
Speed is of the essence
One key trend is the speed in which borrowers are now needing their loans deployed to ensure they can complete on a property transaction. Recent government intervention, namely the stamp duty land tax (SDLT) holiday, has resulted in increasing competition and rising house prices. The first Nationwide house price index (HPI) following this policy’s introduction showed an annual 1.5% rise in general house prices, in contrast to the 0.1% decline the month prior.
When coupled with the fact that the SDLT holiday ends on 31 March, 2021, borrowers are keen to act quickly to reduce their chances of losing out on potential property opportunities. What’s more, there is likely to be a surge in activity in the final month that the SDLT holiday is in place. This means that lenders have to act quickly and ensure they have access to in-house credit so that loans can be deployed as soon as is viably possible.
When coupled with the fact that the SDLT holiday ends on 31 March, 2021, borrowers are keen to act quickly to reduce their chances of losing out on potential property opportunities.
Consolidation of the specialist finance market
In the months preceding COVID-19, the number of specialist financing firms entering the market was growing. As more and more brokers and borrowers became aware of the benefits bespoke loans could offer, demand for such services grew, and many new firms were keen to meet this demand.
However, as the reality of the pandemic hit, many of these firms found themselves unequipped with the experience needed to properly navigate these choppy waters. Established lenders, on the other hand, were able to rely on the quality of their services and the strength of their client-broker relations, leaving them as the only option for those seeking fast finance during the lockdown.
Specialist lenders that managed to continue through past lockdown are now experiencing a newfound appreciation of their services, a trend unlikely to end anytime soon. After all, borrowers and brokers benefit from specialist lenders due to their ability to deploy loans quickly and also tailor their products and services to the individual needs of each client.
Mortgage application difficulties
Finally, it is being reported that the those who are taking advantage of the mortgage payment holiday scheme are struggling to take on new debt. Given that the Financial Conduct Authority made it especially clear at the time that participation in this scheme wouldn’t affect one’s credit rating, the fact that some applicants have reported traditional lenders denying mortgage applications has left many prospective buyers worried and confused.
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Of course, it is understandable that in these uncertain times, lenders would view a failure to meet previous mortgage payments as a negative mark on an applicant’s application. However, given the completely unprecedented nature of the times we now live in, lenders should not be penalising those that were simply following advice and taking advantage of a government-backed scheme. What is needed is for lenders to properly assess each application on a case by case basis before making a final decision.
Ultimately, I am optimistic that the lending market will make the changes needed to properly equip itself for the current climate. The property market is experiencing a mini boom, which is positive news for all those involved in real estate, including lenders. I look forward to seeing a sector primed and ready to play a leading part in the UK’s economic recovery.
Michalis Michael, CEO of DigitalMR, explores these findings and what they mean for the future of banking.
When we are finally on the other side of the coronavirus pandemic, several key sectors will be remembered positively for the way they took charge and handled the crisis, from healthcare to supermarkets and logistics companies.
Banks, on the other hand, are unlikely to fare as well in the eyes of consumers. A social intelligence report compiled by DigitalMR analysed customer sentiment amongst the top 11 global banks during the period of February 2018 to April 2020 and found customer relationships hit an all-time low during the peak of COVID-19.
In today’s digital world, dissatisfied customers can switch provider with the click of a button and, if banks are to emerge stronger, they must take heed of lessons from the lockdown period and prioritise customer experience in a way that they have never done before.
Here are five of the main customer service lessons banks should take from the coronavirus lockdown according to artificial intelligence.
1. They need to be adaptive
The banks that received the most positive sentiment during lockdown were those that were reactive and quick to adapt their approach in line with what their customers truly needed. Unfortunately, they were in the minority and, despite so much bank advertising claiming to be "by your side" and "in this together", many failed to practice what they preached. In such times of adversity, banks needed to truly demonstrate they were listening to their customers by providing personalisation and products that reflected their needs at specific moments in time. Moving forwards, they must take a more customer-centric approach and provide real solutions in response to new and emerging challenges their customers are facing.
The banks that received the most positive sentiment during lockdown were those that were reactive and quick to adapt their approach in line with what their customers truly needed.
2. Digital is king
Our world today is undeniably digital, and the pace at which disruptive technologies are arriving is accelerating. Arguably, digitalisation in the banking sector moved at an even rapider pace during lockdown, when even those unfamiliar with online banking were forced to bank from home as banks scaled back physical channels and human-led advisory. Despite this, many banks did seemingly little to speed up and optimise their digital processes to account for a surge in online enquiries and applications for Government support, such as the Coronavirus Business Interruption Scheme [CBIS]. To put themselves in better stead post-coronavirus, banks must become innovative and embrace digitalisation so their responses to emergencies like COVID-19 are quicker and more effective. There is no getting away from the fact that digital transformation is vital if they are to be fit for purpose when it comes to lending in the future.
3. It pays to be efficient
Our analysis of customer sentiment throughout lockdown shows that lengthy wait times to speak to a customer service adviser was one of the main frustrations, with some customers experiencing waiting times of four hours plus, and banks like Barclays pulling their customer service functions completely.
Crisis-stricken customers need quick support and solutions, and banks must work hard to address efficiency if they are to improve customer experience moving forwards. Much of this will be achieved by enhancing digital self-service for customers and implementing immediate measures to ensure they have the operational capacity to act quickly. COVID-19 has proven that automation and using data to make efficient decisions is essential for handling increased demand for credit and delivering faster decisions.
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4. They must act in times of need
Despite the Government saying in March that banks were required to grant temporary reprieves on mortgage repayments to help families struggling financially during the crisis, our research shows that many failed to issue them. Whilst payment breaks are not a long-term solution for those in financial trouble and could raise bank liquidity concerns, customers in distress need to know that they can turn to their bank for extra support. Many consumers will be considering a switch post-lockdown, so it’s critical that banks offer the trust and services that they demand.
5. They must adapt their fraud strategies
Another key concern amongst customers during lockdown was inconsistencies surrounding fraud, with many consumers worried by their bank’s lack of response to fraud calls, and banks such as HSBC reported to have been overzealous with fraud concerns by cancelling cards when not required. According to Proofpoint, a cloud security and compliance specialist, 80% of accredited banks were unable to say they were proactively protecting their customers from fraudulent emails, and 61% have no Domain-based Message Authentication, Reporting and Conformance [DMARC] record whatsoever, putting customers at heightened risk during the pandemic. To regain customer trust, banks will need to enhance their fraud detection activities to mitigate new financial crime typologies, as digital transactions increase and electronic payment growth accelerates.
Whilst our findings related to banking customer sentiment during lockdown are somewhat scathing, banks can still emerge stronger from the crisis if they learn from their shortcomings, implement the necessary immediate measures and take advantage of opportunities. By embracing digitalisation and using artificial intelligence to inform their responses to customer needs, banks can successfully navigate the new normal, support disproportionately affected customers and renew consumer confidence.
Paresh Raja, CEO of Market Financial Solutions, examines the impact of the SDLT holiday so far and the importance of reinvigorating the property market.
With a value of £1,662 billion, the UK’s real estate market is a vital contributor to economic growth and productivity. That’s why the government’s plan to support the UK’s post-pandemic recovery has focused so heavily on real estate. After all, it was one of the first sectors to benefit from the initial easing of social distancing measures, ensuring that buyers and renters were once again in a position to move homes and initiate new property transactions.
Most recently, Chancellor Rishi Sunak took the bold step of announcing a new Stamp Duty Land Tax (SDLT) holiday applicable to all property transactions until 31st March 2021. The government estimates that this will see average SDLT bill cut by £4,500, with nine out of 10 buyers purchasing a main residential home exempt from the tax.
The move aims to encourage buyers back to the real estate market, and so far, it has been having measured success. Estate agencies have noted a spike in enquiries – importantly, these enquiries range from first-time buyers to non-UK residents seeking a buy-to-let property. While it is too early to tell whether the holiday will bring about a stable and sustained increase in real estate transactions, the fact prospective buyers have acted immediately following the SDLT holiday announcement is promising.
With a value of £1,662 billion, the UK’s real estate market is a vital contributor to economic growth and productivity.
Unlocking the full potential of the SDLT holiday
The SDLT holiday provides the financial incentives needed to reignite interest in property, but one feels it will only have limited success. This is because homebuyers will still struggle when it comes to finding the right type of finance needed to complete on a sale.
When lockdown measures were first introduced, mainstream mortgage providers decided to retreat from the market by limiting their product and service offerings, freezing new applications and delaying the deployment of mortgages already agreed to in principle. This had dire consequences for those in the middle of a property transaction, increasing the risk of chains collapsing.
In response, brokers and borrowers turned to established specialist finance providers who remained committed to meeting the needs of the market. Bridging loans became a popular option due to their speed, flexibility and ability to be tailored to the individual needs of each borrower. While transactions did decline during lockdown, a proportion of those completed was due to specialist finance.
Now, banks and mortgage providers are once again returning to the market. However, the range of mortgage products available is still limited. There are also fears that these traditional lenders will only deploy loans for a handful of cases in order to minimise their risk exposure. Indeed, there are already reports of banks not deploying mortgages to borrowers who take advantage of the COVID-19 loan repayment holiday scheme.
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Just like we saw in the aftermath of the global financial crisis (GFC), it is during times of economic recovery that the need for creative solutions that support growth and stimulate investment are needed. And similar to what we witnessed in the months and years following the GFC, specialist finance is rising to the call by ensuring that homebuyers are able to act confidently and quickly.
At this critical moment, it is important that buyers and property investors have access to the finance needed for new home purchases. This requires research and a full appreciation of all the products and services available beyond just the high street.
Failing this, there is a real risk of the SDLT holiday only having limited success.
