Navigating through uncharted waters: from crisis management to forward-looking

By Banking, News

The big unknown of the corona crisis brings banks in uncharted waters. In order to weather the storm, banks need to make a shift from crisis measurements to a long-term solution. Although Dutch courts are hesitant to file unnecessary corona bankruptcies¹, the situation urges to make this shift quickly. Latest figures corroborate this urge, as they demonstrate that support already came too late for a rising number of companies. Despite crisis measurements, 2/3rd of the Dutch hospitality industry is now on the brink of bankruptcy².

This situation requires strong collaboration between entrepreneurs, banks and the government to find a solution that fits both the short- and long-term. In this article we describe how management can remain firmly at the helm, while navigating the bank into calmer waters.

Source: CBS, April 2020

Lessons from the financial crisis
The crisis of 2008 teaches us that having a forward-looking perspective will significantly increase the odds of a long-term survival. Research shows that just 9% of companies came roaring out of the last crisis³. Most companies battened down the hatches, while some continued to run a tight ship. Companies that dared to innovate, refrained from rigorous cost cutting and focused on efficient investments in their core business, jumped the curve and outperformed their peers after the crisis4  . Inspiring examples from last crisis are not only well-known tech start-ups (e.g. Adyen, Uber) but also traditional companies that were able to reinvent themselves (e.g. Lego, Domino’s Pizza).

Source: Gartner expo 2019, Barcelona

Although each crisis is unique, history shows that a forward-looking approach can be rewarding for every company.

Break away from crisis management, to focus on the future
While some companies are already adapting to the new 1.5m economy, most banks are still tangled up in crisis management. How can banks break away from crisis management and focus on the dot on the horizon?  In order to do this, fact-based decision making is paramount (see our previous article). This can be hindered by the fact that current forecasting models are not designed for these unprecedented times and are based on historical data.

At IG&H we notice that this uncertainty requires banks to accelerate their efforts to become more adaptive and data driven. Examples that we already see or you could think of are:

  • Next level digitalisation of key customer journeys as the new standard (e.g. digital signing of mortgage)
  • Introduction of continuous monitoring – providing both credit departments and entrepreneurs insight into their short-term liquidity need and longer term outlook (e.g. stress test app)
  • Call centre automation by use of AI and robot technology to reduce operational pressure
  • Data-driven lending – make application and review process for emergency loans data driven
  • Active use of dashboarding and Management Information to monitor large volumes of applications and keep track of progress
  • Strengthen financial restructuring activities to prevent clients from bankruptcy

Maintain your crisis execution power
A much-heard positive side effect of the crisis, is that a lot of companies have had a crash course in fast decision making and execution power – and found their true agility. The trick will be to maintain and nurture these new learned habits and embed these into your daily practice when social distancing restrictions will be lifted.

Start with data driven customer insights and learn by doing
No company can turn itself around overnight, but every company can learn by doing. For example, developing a data driven solution for emergency loans for SME (BMKB-regeling) could be the new blueprint for the long-desired digitalisation of all regular commercial lending processes. Data driven lending as a solution, not only to cope with Corona impact but also to control risk, improve NPS & sales and reduce costs after the crisis.

Because of the urgent need for survival for a substantial group of entrepreneurs, some parallels can be drawn with medical triage. Clients do need a quick fix, but only one that helps them for a long-term survival. To do so banks need to answer several difficult questions fast:

  • How can we determine which clients are in direct need and how to support them with forward looking perspective instead of a quick fix?
  • Which clients do not have a chance for survival?
  • How could we offer smart monitoring to our clients and what is the impact on operations, IT and client interaction?
  • What solutions would help clients to become financially more robust so that they can survive a double dip or any other setback?

By making the leap to becoming a more strategic partner in business for their clients, banks can be part of this long-term solution. And this might just be the key for banks to come roaring out of this crisis. By making their clients successful, banks become a true success themselves.

Contact
Bas de Jong
E: bas.dejong@igh.com

¹ FD, Rechters krijgen oproep om onnodige coronafaillisementen te voorkomen, April 2020
² Koninklijke Horeca Nederland, April 2020
³ Harvard Business Review, Roaring out of Recession, 2018
4  Gartner, Barcelona Expo, 2019

Will finding a dream house remain being just a dream for first-time homeowners?

By Banking, News

It has already been a month since a third major protest was held at the Malieveld. After the agricultural sector, the construction sector now calls for attention, too. Although the nitrogen problem has been known for a while, farmers and construction companies feel abandoned by politicians because they lack help with this inevitable change. And it is not only farmers and construction companies that feel the blow. In the short term, the impact of restrictions will also be felt across the housing market.

It fits the image of a housing policy that – in recent years – has sometimes caused more problems than it has solved. For years, several government agencies and private sector parties have worked at cross-purposes, insufficiently advancing towards a common goal together. With the current, favorable economic tailwinds, the time has come to jointly take targeted action – from national and local government to mortgage lender – and tackle the problems in the housing market.

The situation of Kees illustrates the state of today’s housing market. In 2005, Kees wanted to buy his first house in the city but decided to rent a place with his girlfriend instead, because purchasing a home turned out to be too expensive. Now, 14 years later, they are a young family with a middle income, and they still can’t afford to buy their own home due to rising house prices and the housing market shortage.

Every day, we read another great example of the upended housing market. A €1.5 million, simple terraced house in southern Amsterdam was sold within a week. For the first time, the interest for a rate fixation period of 30 years drops below 2%. One out of ten first-time homeowners now opt for ‘interest-only’ and prefer lowering their monthly costs by a few hundred euros over accruing, paying off, or benefiting from mortgage interest deduction. Or, various mortgage lenders decide to deduct credit spread for ‘interest-only,’ 12 months after the start of a major campaign aiming to encourage action on interest-only mortgages. For consumers, it’s all difficult to understand.

Fortunately, it was time for the 2019 opening of Parliament. There was an ambitious section on the housing policy for the coming year, in which the government tries to make up lost ground with a much-needed new set of plans. The proposed measures – from encouraging housing cooperatives, constructing temporary houses, and adjusting the transfer tax to setting up a separate building fund for the local preparation of construction sites – seem to make sense in terms of content. These plans are necessary to help people like Kees get their dream house in the long term.

However, it is striking that within the same government, plans don’t seem to have been aligned. For example, the Ministry of Agriculture has not taken action on the nitrogen crisis, which currently impedes 18,000 construction projects. And due to the new guidelines set by the Ministry of Housing, Spatial Planning, and the Environment, newly built houses will be 15% more expensive, while the average price of new houses is often too high already for less privileged home seekers.

If this trend continues, the consumer won’t stop footing the bill any time soon. This is also evident from the accelerated rise in the average mortgage loan (+3.4% compared to Q2, 2019) and the first-time homeowner’s average age compared to the previous quarter (+5 months, 31.8 years old – source: Kadaster). Therefore, people like Kees will have to keep their patience for a while.

In my opinion, better cooperation is essential to really tackle the issues in the housing market – cooperation between various government agencies, but also with market parties such as mortgage lenders. Cooperation that’s aimed at a solid long-term plan, which also provides short-term help to groups that struggle with getting help – and which includes smart solutions for financing housing and encouraging innovation in construction to achieve more sustainable and faster construction.

As Remkes wrote in his report: “Not everything is possible.” But I’m convinced that we can make the housing market a lot more accessible again – especially to people like Kees – if everyone in the sector cooperates well, if targeted choices are made, and if the policy is aligned.

Contact
Bas de Jong
E: bas.dejong@igh.com

What would happen if innovative parties work together using a new mortgage platform?

By Banking, News

Imagine one-stop-shop for everything you need for your mortage…

Finding your dream home on the first try and immediately having all the documents for your mortgage application at hand. It sounds like a dream scenario, something that people will enjoy in the distant future. However, this dream scenario is actually much closer than you think. Various innovative parties are already individually working on parts of this process. What would happen if they all worked together?

We have created a fictitious scenario in order to show the possibilities:

Step 1 | The search
Your dream home, based on personal data

As a consumer, your knowledge of the housing market is still limited. Suppose you want detailed advice based on your personal preferences and behavior: whether you should rent, sell/buy or renovate, where to live? By linking various data sources such as your travel time, CBS for demographic development and even your LinkedIn for the best chance of finding work; you will quickly find which home best suits your lifestyle.

As a consumer?

Finding the perfect location will be a better investment and also create a higher quality of life.
Innovative parties already offering solutions: Buurtkompas, Suburbia.

Step 2 | Bidding
Peace and security through personal digital support

This is where it gets exciting. Arranging everything when it comes to a new property or mortgage is always a hectic process, even if it is made as easy as possible. Doubt often can take the upper hand. Am I really making the right decision? Technological progress has made the whole process much simpler. Augmented reality tells you everything about the house and the neighborhood. A smart algorithm helps you to make the ideal bid, so that you are able to buy a house without overpaying. Once you have made the bid, you will be digitally (but personally) at the time and place that suits you best.

As a consumer?
No longer pay an average of €4,000 – €5,000 too much for your dream home.
Innovative parties already offering solutions: Blippar, 24 Sessions, Carevoice

Step 3 | Funding
Instant mortgage process based on source data

Applying for a mortgage is a complex process. It would be nice if lenders immediately knew who you are, so that the risk for all parties involved, from bank to seller, is reduced to a minimum. By basing the mortgage process on source data, working with standard credit scores and using block-chain technology, the costs of the current mortgage process for customer and lender can be reduced by more than 50%. You, as a consumer, immediately know where you stand.

As a consumer?

Faster mortgage process at less than 50% of the cost and effort.
Innovative parties already offering solutions: Handig!, Credit.com, iWize, Ockto

Step 4 – Renovating
Easily arrange everything through one platform

At the moment your keys are handed over to you, uncertainty flares up again. All of a sudden, you are faced with countless choices and you want to use your budget and time as efficiently as possible. Where can you find a good plasterer? Which carpenter has an agenda that fits with yours? How do you ensure that you set the right priorities? If a mortgage lender is able to connect a customer to the right contractors for the job using a new, special platform, it will save 20-25% of the customer’s money, not to mention the time saved.

As a consumer?
Being able to do more in your home by intelligent expenditure of the  20-25% of the saved time and remodeling budget.
Innovative parties already offering solutions: OSRE, Klushulp Centraal Beheer

Step 5 | Living
Get everything out of it effortlessly

Your house has become your home and your life keeps on changing. Before you know it, each month you’re paying 10-25% too much for your insurance, mortgage or energy bills. Based on a smart set of questions, you will receive personalised tips from your mortgage lender at an advantageous time, which you can then validate at the click of a button. For example, you can automatically adjust the value of your home, which in turn can immediately lower your monthly costs.

As a consumer?
Save money for enjoyable things, by reducing your monthly fixed costs by 10 to 25% through smart tips.
Innovative parties already offering solutions: De Energiebespaarders, Nationale Hypotheekbond

 

Creating an effective consumer journey is now of the essence, as mortgage lenders still often think using the possibilities of their own mortgage platform. As you can see, technology is not a limiting factor, but rather an enabler.

With a unique combination of sector expertise and the Technology, Analytics and Organization Transformation competence teams, IG&H is well-positioned to connect the many separate initiatives into an integrated, customer-centric view and to turn them into a valuable and memorable customer experience. The first organization that takes this step, will gain a substantial (extra) part of the Dutch morgage market.

Would you like to know more about the possibilities? We will gladly assist you.

Bas de jong                   Jules Hoppenbrouwers

Manager Banking            Manager Digital Customer Experience
b.dejong@igh.nl              j.hoppenbrouwers@igh.nl