By Byron Kaye

SYDNEY – A 10-minute loan for your home is possible at the touch of a screen on your smartphone. As rising interest rates thwart a boom in property, which has been fuelled by a panic-fueled housing bubble, and eat into the income from mortgages, the focus shifts to cost-cutting tech.

A jump of almost one-third property prices from 2020 to the present caused by COVID-19, saw the Big Four lender book a blockbuster profit. But, inflation raged and brought about a shock rate increase this month.

Banks that make the majority of their profits from mortgages are now looking at automating every stage of the loan process. They also want to reduce overheads like staffing, real estate, and other costs to grow profit from what analysts believe is a shrinking money pool.

Only the Commonwealth Bank of Australia (OTC) (CBA), which is Australia’s largest lender, has set a speed goal for its automation drive. According to it, a fully digitalized loan system that was launched Tuesday can process an application within 10 minutes.

However, in this month’s earnings update, National Australia Bank Ltd (OTC:) Ltd is (NAB), Westpac Banking (NYSE:) Corp. Australia and New Zealand Banking Group Ltd.

Hugh Dive (chief investment officer, Atlas Funds Management) stated that they are incentivised by the fact that technology drives people online to make money.

They can increase profit, but not their top line.

Brendan Sproules from Citibank, a Citi banking analyst said in a client note that Chief Executive Officers face an “endless fight to transform their 1970s/80s process & systems into the new digital age”.

The possibility of accelerating this process faster by increasing the cash rate may be a good thing.

Customers will not need to complete paper forms. Instead, they can enter the address of the property and their login details to bank accounts. The customer’s smartphone or computer camera will confirm their identity.

Algorithms calculate the rest such as employment history, probable purchase price and likely job search.

People who are experts in loan automation software say that a bank employee can only step in when the software detects discrepancies.

Some online lenders and smaller ones already automate mortgage application, but not the Big Four. The Big Four dominate Australia’s A$10 billion ($7.00 trillion), housing market. Three-quarters (75%) of total loans are valued at A$10 trillion.

Hessel Verbeek (head of KPMG Australia’s banking strategy) said that “what we’re currently seeing is a lot more optimization using existing processes and using existing loan origination software.”

“There will be improvement when key systems are actually replaced.”

Banks are not revealing how much money they expect to invest in automating mortgage approvals nor what they hope to save.

According to data provided by KPMG, 35% of A$3.6 billion that the Big Four spent in the first half 2022 fiscal year went towards “productivity and Growth”, as opposed to 32% the year before.

NAB, second largest lender, announced last week that its investment in “customer experience, efficiency, and sustainable revenue” increased 46% to A$228 millions in October-March compared with the previous year. The lender stated it would like every home loan to be fully automated by 2024.

ANZ lost two years of mortgages due to understaffing. It has now begun digitizing its processes.

According to The Australian, CEO Shayne Elliott stated that “There is no doubt we have some catching up,”

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Because of large compliance and risk management reforms that drained both management budgets as well as investment attention, banks took a long time to automate retail products. This was partly why industry experts and analysts said the bank’s slow pace.

Rebecca Engel is the head of Microsoft Corp (NASDAQ:). Australia’s financial services unit stated that there had been a significant increase in the investment, deployment and acceptance of technology by banks, in conjunction with increased regulatory attention during the pandemic.

Engel stated to Reuters that the goal is higher levels and quality assurance at a lower price.

Technology drives technology.

($1 = 1.4282 Australian dollars)