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Blockchain set to revolutionise the lending market

Blockchain technology is poised to transform the mortgage industry, promising swifter and more secure data transfers.

During a recent webinar on blockchain and finance hosted by Credit Mediation Services, Mauro Casellini, a TEDx speaker and digital professional, underscored how blockchain represents a shift away from the traditional centralised banking system toward a decentralised and more secure alternative.

He elaborated on the vulnerabilities associated with the current banking sector, where a few major banks dominate. As such, in the event of communication breakdowns, scams, or business failures, significant risks can arise.

In a decentralised blockchain system, every participant, including banks, intermediaries, mortgage brokers, and others with a database, plays a role in every transaction. If one participant drops out, the system remains unaffected because all transactions are permanently recorded, Mr Casellini explained.

In the mortgage industry, this blockchain innovation promises accelerated data and fund transfers among relevant parties.

This means that the bank will likely possess the most comprehensive information, while the property seller may only be privy to the buyer’s financial capacity.

This efficient sharing of real-time data enables quicker decision making without the need to contact multiple participants for updates.

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For example, regardless of whether loan amounts increase or decrease, digital document signing, fund transfers, and land registry updates all occur in real time; blockchain would benefit all relevant parties.

“We can act faster, we do not need to call 50 participants and tell them what they all need to know,” Mr Casellini said.

However, blockchain technology is still evolving and not all mortgage transactions necessitate real-time processing.

In some cases, a day’s delay may suffice, with a secondary real-time layer available, he added.

Open banking

This drive toward faster and more secure banking transactions aligns with the broader adoption of open banking by lenders.

Recently, the Commonwealth Bank of Australia (CBA) integrated open banking data into its ApplyOnline platform for brokers, enabling them to leverage this data in the mortgage application process.

While open banking has been available for years, its implementation for brokers has just begun in earnest and primarily focuses on data collection.

Under this system, consumers can securely share their financial information with their mortgage brokers and trusted advisers, eliminating the need for insecure password sharing.

Blockchain to streamline property transactions

Meanwhile, the Real Estate Institute of Australia (REIA) is closely monitoring the blockchain movement in the property market, releasing a report last year, which highlighted blockchain’s applications in property transactions.

The Blockchain: Opportunities and Disruptions for Real Estate report, developed in collaboration with the Real Estate Institute of New Zealand (REINZ) and the RMIT Blockchain Innovation Hub, revealed how distributed ledger technology can revolutionise the home buying process.

The report highlighted how blockchain can streamline securitisation processes, resulting in lower costs, faster transactions, and enhanced security and transparency from loan origination to maturity.

Additionally, blockchain can facilitate new markets where lenders can secure loans against collateralised assets, including cryptocurrencies.

[Related: Major bank turns on open banking for brokers]

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