Brick by brick: Building the bank of the future via housing ecosystems

The emerging ecosystem economy, driven by shifting customer expectations and technological innovations, has reshaped how value is created and who captures it. In this changing macro dynamic, the ecosystem strategy provides a critical pathway to build growth and resilience, especially for banks to compete in the landscape of tomorrow.

The housing ecosystem is a strong prospect for banks to maintain their current mortgage revenues and grow new revenue streams in adjacent areas. Homes are one of the world’s largest asset classes—representing approximately 20 percent of global asset values—and the biggest investment most people ever make. For banks, the housing ecosystem represents an asset value that is about six to ten times the size of the mortgage asset.

Banks are well positioned to have a driving role in the housing ecosystem and must innovate to achieve top-line goals. By offering a wide array of services, an existing role (e.g., mortgages and home-related financing), and comprehensive customer data, banks have a strong start to integrate the fragmented ecosystem. But in the market for these services, banks now face increasing competition from tech players offering innovative customer-centric solutions. This technology-driven disruption has led to commoditization and margin compression. Ecosystems offer a way for banks to differentiate on overall experience instead of price.

To build upon the established role in mortgage financing, many banks have digitized the complex and stressful mortgage application process as an entry point to improve the housing journey for customers. From that start, they have extended cross-sector value propositions in other directions to take on the role of an ecosystem orchestrator, consolidating various housing journey transactions into one integrated customer experience.

Recent figures from our banking benchmark survey show banks making a global shift toward housing ecosystems. About 47 percent of banks in Western Europe, 39 percent in Developed Asia, 24 percent in North America, and 14 percent in Central Europe say they are now offering (or planning to offer) property search capabilities as part of their digital mortgage journey.

Leading banks are already generating significant core business contribution through ecosystems. The most immediate impact is on leads and mortgage origination. Five years ago, a multinational European bank launched an AI-enabled homebuying app with property appraisal and mortgage simulation functionality; it now accounts for more than 30 percent of the bank’s total mortgage origination. Similarly, in Asia–Pacific, a market-leading local bank’s home financial planner and property search marketplace generates about 25 percent of the bank’s mortgage leads. And among leading financial players in the United States, those offering housing ecosystems that integrate various steps of the homebuying vertical see twice as much improvement in their customer satisfaction score as other banks attain.

The most successful players adopt a strategy in housing that employs a segmented approach with a portfolio of initiatives, rather than an “everything to everyone” solution. Best practices may include trying out new ideas quickly, learning from any failures, and making improvements just as fast. Each customer segment has vastly different needs and challenges. In homebuying, a first-time buyer often seeks guidance and a digital, personalized process, while buy-to-let investors may prefer detailed comparisons and control. Building a housing ecosystem that meets these diverse objectives involves a step-by-step process. Especially at the beginning, it is important to remember that even marginal improvements (e.g., churn reduction, conversion improvement) make a difference and can generate a positive spiral.

Data points in this blog are based on Finalta’s databases.

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