With the announcement last week by the Mortgage Trading Exchange about the integration of its e-trading standards, which could save the industry an estimated £25 million, Mark Lofthouse, the mte’s CEO looks at the success of common trading platforms and the future of electronic trading.
The delivery of true electronic trading is arguably one of the most significant developments in the mortgage industry for years. Its widespread adoption by intermediaries and lenders has significantly affected the way the industry operates with over half of all mortgages now being submitted electronically. The dramatic progression of e-trading has captured the headlines for sometime and will continue to do so as e-trading continues to play the lead role in delivering better service.
Embracing online technology
So why has online trading been so rapidly embraced? Well firstly, the fact that there are no tangible products to store in warehouses and deliver to clients means that the mortgage industry is ideally suited to benefit from operating in a virtual environment. Secondly, technology has historically driven down costs, improved customer service, driven down processing times, and acts as an essential aid in meeting compliance requirements and improved management information for everyone concerned.
The single pass ‘right first time’ process offered by common trading platforms also provides the obvious compliance and customer service benefits, as well as dramatically streamlining the mortgage application transaction. With electronic applications there is no need to re-key information already held, and with real-time, fully scored agreements-in-principle (AIPs), intermediaries can give their customers confidence that a lender will provide them with the necessary funds, in principle, in a matter of minutes. The self-service supply chain also means that an intermediary can track applications at any time, keeping anxious clients constantly informed.
Shift to common standards
While lenders’ own online systems initially proved effective, there has been a huge shift recently with intermediaries preferring to use a common trading platform for the electronic application process.
It makes sense that intermediaries should work in a consistent way with many lenders and not have to log-on to different websites, each of which work in different ways and require different passwords. Additionally, intermediaries are using different point-of-sale, compliance and sourcing systems and integrating these to lots of lenders is simply uneconomic and very costly in time and money.
The success of the common trading platform is largely down to the fact that it has been designed to meet the needs of everyone involved and allow for a single integration to open up electronic trading capabilities with lots of lenders at once. The adoption of the common trading platform by intermediaries is now the norm for many and will rapidly become the norm for all. The move from lenders’ online services to common trading platforms has already started with circa 20 per cent of all UK mortgages, submitted by intermediaries, now being transacted through the common trading platform.
Common trading platforms are also leading the way in the delivery of industry-wide electronic trading standards for a range of business processes including broker authentication, submission of AIPs, Key Facts Illustrations (KFIs), full applications, messaging and case-tracking.
Currently, every mortgage lender’s KFI, AIP and full application form uses an XML format tailored to meet the lender’s own requirements, which are then processed via bespoke ‘gateway’ systems. This, as you would expect, for multiple implementations is a hugely expensive and time-consuming process.
Now, however, thanks to the proven technology and established infrastructure of the common trading platform, lenders can use the Mortgage Trading Exchange’s (mte) electronic trading standards, to accept the same specific lender XML from other sources, which will then be processed by the lender’s own back office system.
Opening up the platforms electronic trading standards has eradicated the need for lenders to develop and implement individual systems. This, if based on 50 lender implementations with an estimated initial project cost of £200,000 and £60,000 per annum to maintain, will now save around £25 million over five years for lenders alone.
Broker benefits
A number of enhancements have also been made for the benefit of intermediaries. The same account number and password can now be used with other trading platforms and lenders’ own systems.
To improve communication between intermediaries and lenders, a suite of standard messages and formats has also been developed, which, with their ability to be used with other platforms, will help to provide the much sought after consistency and conformity within the industry.
So what’s next? The use of technology has significantly affected the way the industry operates. However, the pace of change in the mortgage industry is not going to slow down and technology will be instrumental in enabling businesses to keep up with this change. The decision to open up the mte’s trading standards was driven by demand and it’s imperative that further open discussions between lenders, intermediaries and systems providers take place regarding technological issues facing the industry.
Mark Lofthouse is CEO of the Mortgage Trading Exchange (mte)
