Electronic mortgage settlements will transform competition as lenders race towards technology, transparency and service.
Property Exchange Australia (PEXA) enabled electronic settlements are changing the nature of mortgage competition as lenders work together to join the digital platform.
“It is not dissimilar to when the ASX became automated,” PEXA chief executive Marcus Price told Mortgage Business.
“With the new capability in the market comes a new basis of competition, and that competition is going to be about technology and transparency,” Mr Price said.
CBA was the first lender to begin using PEXA – which eliminates the need for settlement documents and manual payments – in June last year.
“In a digital sense you will basically sign your loan agreement and contract of sale, but beyond that, everything else will be handled electronically,” Mr Price said.
The platform is now used by all four major banks.
CBA head of mortgages Clive Van Horen told Mortgage Business that the lender has already settled 600 loans through PEXA.
“Over the next 18 months, progressively more banks are coming online with more categories of transactions, which will really change the customer experience,” Mr Van Horen said.
“Settling a property is normally quite a stressful experience for customers – the exchange of cheques and title and so on – so digitising that like the stock exchange dematerialised years ago, I think that is going to change the mortgage game,” he said.
In the last two weeks, Suncorp, Teachers Mutual and Bankmecu have joined the platform, Mr Price confirmed.
“This is a 'whole of industry' initiative,” he said.
“The basis of competition will become about how well integrated PEXA is for lending systems and what tools and information you will provide your customers with.”
Mr Price expects banks to develop mobile apps that will track a customer’s mortgage, not unlike the tracking systems used by postal services.
“I expect they will be able to provide mobile apps that will tell people exactly where their settlement is up to, they will have something on their phone which will tell them the other bank is ready, the settlement date, SMS messages to confirm the transaction has happened and confirming receipt of funds and so forth,” he said.
“There will be a lot more visibility and application for consumers to see into the process.”
While he has not seen any evidence of these apps yet, Mr Price is confident they will be arriving soon.
“We are providing all the hooks for the banks and it is a certainty they will be there,” he said.
“There is no doubt that is part of their strategy, to put that into the consumers' hands.”
Widely considered to be the leader in front-end banking technology in Australia, CBA – also a PEXA shareholder– is believed to be best placed to deliver mobile mortgage tracking capabilities.
“CBA are well placed because they have the front-end capability and will be able to take advantage sooner than others,” Mr Price said.
“That’s their real play I think,” he said.
“They will have a first mover advantage with their front-end technology.”