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Collaborate or consolidate

The mortgage market is on the road to e-commerce but if collaboration is

lacking then it may lead to further consolidation.

The life and pension industry was the first to recognise the value of

agreeing and working to electronic data standards for moving information

smoothly and quickly between customers, advisers and product providers via

the internet.

Customers can expect to receive confirmation that a policy is now in force

and even get updates on the performance of policies via email.

There is clearly an appetite in the life and pension industry for access

to the financial savings that e-commercialising brings. Many others can see

that the internet will make it easier to contact and service existing


That enthusiasm has led key life, pension and investment product providers

and IFA networks to collaborate to create electronic data standards for the

whole industry, under the auspices of standards body Origo.

These standards are now being applied to individual product groups and are

being rolled out across the industry. Some providers are already writing

electronic applications for investment bonds, term insurance and even

stakeholder pensions.

But early attempts to put a common trading platform in place in the

mortgage market have so far foundered. The dotcom boom in 2000 did nothing

to stimulate activity. But just when everyone in the industry was beginning

to doubt whether the mortgage industry would ever embrace the benefits of

the e-commerce revolution, suddenly two key announcements indicate the

impasse may be over.

In May, Mortgage Brain, the software platform provider, agreed to be

acquired by a consortium including Halifax, Alliance & Leicester and

Nationwide. These companies make up 40 per cent of the entire lending

market and this move put immediate momentum behind the preparation for

electronic processing of mortgages.

Within a week of this deal, IFonline bought Trigold Solu-tions, the

provider of the offline Prospector mortgage sourcing system. IFonline and

Trigold&#39s systems combined will serve over 20,000 registered users.

IFonline recognised that it needed to offer a combined on and offline,

fully transactional solution to attract IFAs and the broker community to

use its systems.

The importance of offering both online and offline capability when

transacting mortgage business is clear when you look at the practicalities.

An IFA sitting with a customer, having chosen a lender and a specific

mortgage product, may well want to seek a decision in principle before

going through the lengthy process of completing a full application form.

This decision in principle should be issuable today in 30 seconds while

the IFA remains connected to the internet. However, once he has reached

this stage the IFA will, in all likelihood, want to disconnect to complete

the application form itself.

At Focus, we believe these two recent developments will greatly advance

the wider adoption of the electronic processing of mortgages. Our

independent research indicates that huge inefficiencies exist in the

paper-based world of mortgage application processing.

E-commerce could remove these barriers, creating massive cost savings for

mortgage companies. But there are still some obstacles to overcome. There

is the question of charging, for example.

Will the big-name lenders that now own the majority of Mortgage Brain take

money from IFAs and intermediaries for the privilege of passing the

business via the system?

IFAs and other intermediaries might quite justifiably object to this, as

it is they who will be creating the sale and passing it on to the lender in

a cost-effective manner through the system.

A further concern is that smaller building societies may not get the

benefit of elec-tronic processing simply because they feel they cannot

afford to build their own systems or pay the transaction charges that the

owners of these systems will inevitably impose.

We are keen to encourage smaller societies to work together to develop

their own electronic solutions, sharing costs evenly and making it more


The real mark of success is when the majority of lenders, mortgage brokers

and IFAs are processing mortgage applications electronically. If we are

going to achieve this anytime in the next five years, collaboration is the

key, just as it was in the life and pension market.

This is not just about having up-to-date entries on internet-based

comparison tables but being able to offer transactionability, end-to-end

processing and the reassurance of solid security systems.

Internet-based processing, if done right, can offer advisers the facility

not only to get decisions in principle in seconds but also to gain

validation at the point-of-entry of customer data before the application is

even submitted to the lender and then track the progress of the application

through the lend-er&#39s approval systems.

This sort of electronic service will enable advisers and brokers to offer

their customers a better service, which they are happier to pay for. The

industry as a whole benefits because there is not such a pressure on


Customers are getting what they really value – a hassle-free service which

cuts the time it takes to get their mortgage approved, so they can buy a

house or extend their property and get on with their lives. Distribution

costs will be reduced simultaneously because it will be cheaper to process

applications electronically.

There is no doubt that the moves made in recent weeks involving IFonline

and Mortgage Brain have set the mortgage industry on an inevitable path to

building common electronic trading platforms.

The challenge now is to use these initiatives positively to help build

electronic data standards so that the whole industry can benefit from the


Without this collaboration, the internet will serve as a catalyst for

further consolidation in the market.


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