When lenders unite – take fright. OK, the takeover of Mortgage Brain by Halifax, Nationwide and Alliance & Leicester hardly produces nightmare visions but most intermediaries should view this development with a healthy dose of wariness.
Halifax, Nationwide and Alliance & Leicester have a 51 per cent stake in Mortgage Brain and this will rise to 100 per cent within two years. Two other partners are being sought to share ownership.
The stated purpose is to build an effective e-commerce channel between the lenders involved (other lenders can participate without taking a stake in the company) and intermediaries, allowing the applications of your clients to be submitted online.
So far so good. After all, you will not find anyone at Mortgage 2000 bemoaning the benefits of e-commerce. We are believers too. There is no doubt that e-commerce will change the way mortgage business is conducted. At some point in the future, the majority of mortgage applications will be submitted electronically. I cannot say when the threshold will be crossed but it will.
How can I be so sure? How do I know that e-commerce is not just a fad that will go the way as the Chopper bike or flared trousers? Because e-comm- erce makes life easier by giving the intermediary more choice and improved service.
But there key issues that need to be addressed before we can tell how the market will develop.
Will intermediaries want to deal direct with the lender or will they use a trading platform – such as MBL, IFonline, Assureweb or eMortgage?
Will IFAs prefer to submit applications through an offline system or via the internet?
Can the intermediary have total confidence in the mechanism? Can he be confident that applications will not get lost in cyberspace and that the different service standards can be delivered?
What benefits will lenders deliver to IFAs to get them to submit electronically and what impact will the big intermediary networks have?
The latter point is important because many intermediaries believe that the lenders benefit most from e-commerce.
Sure, there is an improvement for the intermediary, but the lender benefits from the cost benefits of feeding applications straight into a system, reduced staffing costs and paperwork and less leeway for cases “outside criteria”.
If the lender is saving money, intermediaries will, quite rightly, expect the benefits to be passed on in improved product terms, etc.
Note that in the key issues I did not ask about what proportion of intermediaries have access to the internet and email. This is not an option. All intermediaries need a PC, quotation system and the means to trade electronically. The forthcoming Financial Services and Markets Act nails any lingering doubts on this issue.
The trading platform has a host of benefits for the intermediary, especially if linked to a mortgage-sourcing system.
The ability to input the applicant's details to produce an FSA-compliant illustration, which prepopulates the application form and sends a decision in principle and/or full application to the lender, is a powerful tool, especially if it can be used offline so the IFA can use it in the client's home and does not incur a phone bill while the application is being populated.
The key players here are MBL, Ifonline and eMortgage. Halifax, Nationwide and Alliance & Leicester have made it clear they want their systems to be the “common trading platform” – the only one that matters.
MBL's Mike Green has said it will become the “Railtrack of mortgage e-commerce”. Remember what I said about being wary of this development?
When competing lenders act in concert you can rest assured that it in their best interests – not in the best interests of intermediaries.
Jumping into bed together illustrates that the recent base rate war of words between Brian Davis at Nationwide and James Crosby at Halifax was phoney. Rest assured, though. I can confirm this blissful marriage will not result in MBL having the market to itself as far as trading platforms go. I would not be surprised to see other lenders forming a separate platform.
IFonline is a high-profile player that has invested heavily, along with eMortgage -20 per cent of mortgage applications being packaged by Mortgage 2000 are already being submitted electronically.
Also hovering in the wings are Assureweb and Network Data. This gives the intermediary the reassurance there will be competition to deliver clients' applications to the lender.
From competition springs benefits in the form of innovation and improved service. If MBL does become a “Railtrack”, rest assured there will be others to make life easier for the intermediary.
Of course, if intermediaries prefer to deal direct with the lender, submitting the application over the internet, then the trading platform is a non-issue. Abbey National has demonstrated there is an appetite among intermediaries for this service and is the clear market leader.
Nonetheless, I think it will be difficult for IFAs to deal direct with lenders because each will have a slightly different process. I believe there will be a limit to the number of processes an intermediary will accept – this is where a trading platform is helpful.
The key issue is customer confidence. Providers need to demonstrate that they have a robust system backed up with the requisite tailored service. This is the main criterion to successfully delivering e-commerce to the IFA.