Online mortgage broker E-Loan presents a challenge
The launch of online mortgage broker E-Loan recently marks another significant milestone in the evolution of online financial services in New Zealand.
Wednesday, July 12th 2000, 12:00AM
The launch of online
mortgage broker E-Loan recently marks another significant milestone in the
evolution of online financial services in New Zealand.E-Loan, which is 50 per cent
owned by listed company eVentures, is competing directly with mortgage brokers
for business.
Instead of having
face-to-face meetings, or conversations with a broker, clients can research and
sign up to a mortgage online.
To do this the site uses
some powerful software which allows people to them to rank mortgages from 18
providers, based on any characteristic they choose, whether it's interest rate,
fees or whatever. Once they have found the mortgage they want they can apply
for it online.
While the application is
done electronically once it is submitted it is passed onto the provider for
processing.
An excellent service feature
of the site is a facility it calls e track. E-Track allows a customer to track
the progress of the loan through the approval process so they know where it is
at, if there is any further information which may be needed, and it gives an
indication when an approval is likely to be made.
E-Loans chief executive
Bruce Gordon says the three keys to the business is that it is first to the
market in New Zealand and it has a strong internationally recognised brand
name, secondly it allows people to do truly comparative shopping the majority
of the mortgage providers are involved in the site, and finally E-Loan is
impartial.
Because the visitor is using
a software programme to evaluate mortgages the subjectivity element of human intervention
is removed.
Gordon says there is a
chance a mortgage broker will favour the product which has the highest
commission.
"Mortgage brokers can
lead people down the wrong path," he says.
Gordon hopes that a site
like E-Loans will help people manage their mortgage more effectively. Recent
research conducted by AMP Banking showed that New Zealanders are lazy when it
comes to mortgage management and spend little time reviewing their debt once
it's signed up.
E-Loans also illustrates how
global the financial services industry is becoming. Listed company E-Loan Inc
put the concept behind the business into practice in the United States. Since
it was launched in 1997 E-Loans has set up mirror operations in other countries
including Australia, France, Germany and Japan.
When it came to establishing
in New Zealand E-Loans had all the software readily available and it was essentially
a matter of New Zealandising it.
One of the outstanding
things about the business is that the local company was able to do this job,
build a website and have it up in running in three months, as opposed to the
scheduled 12 month start up period.
The message here is that New
Zealand businesses have to be aware that their competition is now truly global.
Also E-Loans Inc has
significantly diversified its businesses away from mortgages to include car,
and personal loans, and PC leasing.
While the he jury will be
out for some time on the success or otherwise of E-Loans, the business provides
an important glimpse at how the process of selling financial services could be
disintermediated in the future.
Eventures executive chairman
Craig Heatley is quite candid about the profit potential of the business,
saying it may be three to five years before there is black ink on the bottom of
the balance sheet.
Using E-Loans sister companies
offshore as a benchmark there are mixed signals. The Australian company which
was launched earlier this year not written many mortgages to date, and the US
business is still running at considerable losses.
While E-Loans in Australia
has a negligible market share, E-Loans in the US market has been reasonably successful.
Currently it is the largest
player in the online mortgage market with 20 per cent, however online lending
accounts for only 1.5 per cent of the total lending market.
New Zealand has some unique
characteristics which may augur well for the business. Firstly the mortgage market
has ballooned over the past 10 years. Secondly, New Zealanders have shown themselves
to be early adapters of technology, whether it be eftpos machines, ATMs,
telephone banking or online banking.
While they will use the
comparative features of E-Loan's website, the question is will they actually do
the transaction online, or will they use the information gleaned from the site
to buy a mortgage somewhere else?
Two other unique factors
affecting E-Loans in New Zealand are the business' name, and its URL or website
address.
In New Zealand people tend
to buy a mortgage to finance the purchase of their house, rather than a loan.
In the New Zealand vernacular the term loan is associated with borrowing money
to buy a car, or boat rather than a house. The question is will they related
the term loan with a mortgage.
Gordon dismisses this issue
as semantic.
Technically, he says, a
mortgage is a term for the documentation relating to the loan, it's not the
actual borrowing of money. Also, he points out that providers, such as banks,
are increasingly using the expression home loan to describe their offering,
rather than mortgage.
A second issue, which may
seem small but will undoubtedly have some impact is the actual address of the
website. Because the domain www.eloans.co.nz was already taken (by a company
which provides software to banks and financial institutions), E-Loan had to
settle for a bastardised URL, namely www.eloansnz.co.nz.
The point is that if someone
hears about or sees an ad about the business they are more than likely to type
www.eloans.co.nz into their computer than the proper address.
Chances are they won't find
the site without doing a search or without remembering the correct URL from the
advertisements.
This point was illustrated
by an article in the Sunday Star Times after the site was launched.
Despite having a comprehensive press kit, the paper still recorded the address
as www.eloans.co.nz Special Offers
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