The 21st century has seen digital disruption rear its head in almost every industry. What will it do to those looking to become a mortgage broker and the existing skilled members of the industry?
What is digital disruption?
Put simply, it’s the way that digital technology changes – for better or worse – the business models of existing companies.
It’s part of creative destruction, a term coined by Joseph Schumpeter, that he describes as the “process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. In other words, the old makes way for the new.
The tale of Blockbuster
An example of this is the video rental industry. Blockbuster had been a market leader in the space since its first store opened in 1985. But once high-speed internet became the norm, the value proposition that Blockbuster offered was greatly diminished. Video streaming companies like Netflix could deliver content into people’s homes as soon as they wanted it and the old king Blockbuster simply couldn’t compete. They filed for bankruptcy in 2010.
Blockbuster had ample warning to do something about the coming disruption from streaming services yet they instead did nothing. As long ago as the late ’90s, analysts were commenting that the future for the brick-and-mortar behemoth looked dismal unless they adapted to the coming changes in technology.
How is digital disruption affecting the mortgage broker industry?
One of the biggest changes facing the industry is websites that allow people to broker their own mortgages. This is a change that threatens to cut out the mortgage broker altogether. If, like Netflix did to Blockbuster, these companies can deliver the required service to customers quicker than a broker can, it’s possible brokers will be left behind.
However, the value that brokers provide suggests that their services will be more durable in the face of the digital disruption storm. Netflix succeeded because it was a perfect substitute for Blockbuster’s product, only delivered quicker. Websites that let you ‘be your own broker’ are not perfect substitutes, because customers still have to do the work, gather the research and compare the numbers.
What can mortgage brokers do?
The key is to change what you highlight as your value proposition. Mortgage brokers can bring something to the table a website can’t – personal experience, knowledge and a social touch. Until these are replaceable by technology, mortgage brokers should be safe in the knowledge that they can provide strong value to customers.
It’s also important to remember that new technologies are not always substitutes for existing jobs – sometimes they’re complements that make your business more effective, like better software or apps.
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