In the four years since Marc Andreessen cast his gaze on financial services and declared that “we can reinvent the entire thing,” unleashing torrents of unbundling narratives, the incumbent banks seem to be rediscovering their groove in residential housing, leveraging their span of customer engagement to develop a fintech-powered take on the age-old financial supermarket narrative. At same time, this space has seen an abundance of insurgents with creative combinations to plumb the opportunities surrounding an expanded home acquisition experience. Are the “meek,” with their focus on visceral experience over logical needs, onto something different that can enable them to “inherit” residential housing?
Banks, you have the floor…
McKinsey’s declared earlier this summer that “banks start from a strong position in the race to provide ecosystem solutions” for the space, to tap into the “substantial value inherent in an end-to-end approach that embraces many more aspects of the home-buying process, for example, transaction fees, home renovations, and moving from one property to another.”
After ceding substantial chunks of the market to non-bank financial institutions, leading banks have aggressively reconstituted their mortgage businesses with assistance from fintech startups. Banks have clearly learned to leverage the “Unbundling of the Bank” narrative to their advantage.
The “meek,” your response...
There has been an abundance of new combinations of late as the insurgent “meeks” jostle for their spot in the future of the space. Opendoor snapped up Open Listing to integrate discovery with execution. Amherst launched Bungalo, “unlocking a better way to buy a home.” Rock Holdings rebranded its existing realtor as Rocket Homes to add to its Rocket stable. Zillow’s moving further into mortgage lending. Not to be outdone, Amazon’s Alexa Fund is investing in Plant Prefab to drive its technology further into home manufacturing.
Banks, with their scale, reach and access to cheap, long-term capital, may seem to be sitting in the “catbird seat.”
Yet, the incumbents have problems. According to GroundFloor co-founder Brian Dally, “Today’s consumer expects more efficiencies, greater choices for customer experience and complete transparency. Banking hasn’t adapted particularly well to these desires, and that’s why we’re seeing so many fintech startups emerge to challenge the status quo.”
We accept our banks, but have a deep abiding connection to our soap…
“In the 1950s, consumer packaged goods companies…developed the discipline of brand management... A brand manager would be responsible for giving a product an identity that distinguished it from nearly indistinguishable competitors. This required an understanding of the target consumer and what we call a ‘branded proposition’ that offered not only functional but also emotional value.” (Marc De Swaan Arons, The Atlantic)
If the learnings gained from marketing soap and bleach can be carried over to residential housing, then there’s substantial value in focusing on the visceral stages of the home acquisition experience, rich with opportunities for emotional connectivity. One only has to check out the endless assortment of home shopping shows to wonder why there are few (if any) home financing shows. One can also regard the responses of homeowners during the financial crisis as a stress test for this proposition, where they by and large chose to stay in their deeply underwater homes when a strategic default was logical.
Indeed, owning a home comes with far more emotional weight than other investments we make. If insurgents can pay heed to this reality, they will have the chance to once again outflank traditional lenders by creating experiences that better connect to their hearts as well as their minds.
Marvin Chang leads new product commercialization efforts at Caliber Home Loans, a major non-bank mortgage company. He is on a mission to demonstrate that the incumbents in the space can out-dance the insurgents. All views in this article are his own.