Across every industry new challengers are disrupting the market and taking on the established players. Companies have seen their traditional business models dramatically transformed – and digital technology is at the heart of this change. 

This is exactly what is happening in the mortgage market in Northern Europe where one financial institution has been prompted to find new business opportunities by tangible benefits to its customers.

The starting point was the recognition that customers have concerns that go well beyond how much their mortgage is going to cost – societal issues which engage them as citizens. Climate change and the need to reduce their carbon footprints is, of course, prime among these worries.

As a first step, it launched a free online energy saving check for all homes backed up by advice to help homeowners and businesses reduce their emissions.

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Sustainable homes

Now the bank is going further in a bid to help its customers live more sustainably using smart home devices. Working with Tata Consultancy Services (TCS), it is researching how such devices can change individual behavior.

The goal is to become more than a mortgage provider. To do this the bank needs a rapid way of evaluating ideas about new propositions with customers.  For many banks this can be quite a headache. Customers do not immediately look to banks to help them in non-financial areas.

So, if the bank is going to develop new propositions, a key first step is to find ways of increasing the level of interaction with its mortgage customers. Regular interaction will allow the bank to offer its customers more products and services and build a bond of trust between bank and borrower.

Shantanu Talukdar, Innovation Lead at TCS, outlines the business case:

“Today there are less touch points with the customer, so the bank cannot add any further value to the customer.” 

Solutions from the Innovation Network

Leveraging its Co-Innovation Network (COIN), TCS has worked with Finnish start up Cozify, which provides a hub that allows users to view all their smart home devices from their phone, monitoring everything from alarms to water leaks.

A trial group of customers and bank staff have been given connected devices and the hub. TCS’ team of behavioural scientists are monitoring take-up and usage to build a picture of how people interact with the new technology.

The smart home data generated by the research will help the bank validate progress towards its self-imposed CO2 targets. Through COIN, the bank has also been able to tap into the insights of experts in the utilities sector, the telecom industry and internet of things innovators to validate assumptions.

“It’s about assessing behavioural change,” adds Talukdar. “We want to see if customers are really interested to invest in buying this smart home kit in order to make their lives more sustainable. That’s a practical question. Everybody wants to be fashionable but are you ready to also invest?” 

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Financial boost for homeowners

Making homes more sustainable is not just good for the environment, he says. A smart home is also more comfortable, more convenient and safer. As people increasingly take up the technology the benefits will become clear to everyone.

Talukdar believes smart homes will command a premium in the housing market, which, he says, will give the bank a competitive advantage. “If taking out a mortgage comes with all these smart home benefits and that makes your home more valuable, why would you go with another provider?” he says.

The research aims to cover multiple homes with different personas. Participants have been selected to represent the widest possible range of households, from people living in city centers to those in remoter rural areas.

“This is just the start of a great journey,” he says. “We don’t have a concrete outcome yet. But when we have all the data we will sit down and think ‘let’s see, what could be the new business models?’.