Blockchain technology has the potential to streamline the home loan process into one central hub for brokers on a mass scale, according to a finance company.
Melbourne-based Matias Group director Luke Matias said new technological developments, including Web3 (a new type of internet service that is based on blockchain technologies) and systemised automation could increase efficiencies in the mortgages process.
Mr Matias – whose company matches businesses with different lending options using technology across equipment and vehicle finance, commercial mortgages, debtor and trade finance, cryptocurrency lending, government grants, and working capital – flagged that the landscape could alter significantly over the next 12 months, and as such, urged brokers to increase their understanding of these new technologies.
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“Rather than being forced down the track, brokers must take their blinkers off right now and understand that this technology is coming and how they could use it,” he stressed to The Adviser ahead of the 2022 Better Business Summit in Adelaide.
Mr Matias is among many voices in the financial services industry who has predicted a rise in investments in blockchain technology and the leveraging of decentralised Web3 applications in the near future.
While this could generate efficiencies in their brokerages, it could act as a threat to those unwilling to adapt to it, he warned.
On identifying pain points in securing a mortgage, Mr Matias said: “To get a home loan approved for a client, mortgage brokers currently have to get legal signatures and get lawyers involved from the buyer and seller’s sides, and they have to get valuations and quantity surveyor reports done. Then they have got to get the funder to underwrite the deal.
“And they’re all separate transactions.”
However, with blockchain technology these tasks would occur in one central hub on a mass scale, with all pieces of information (including property titles) available in this hub, he said.
“Everything can be held in this unequivocal digital blockchain environment. In order for that piece to appear on the blockchain, it needs to be okayed by all sides, much like an escrow,” Mr Matias said.
“You put your money into escrow, but it’s only when both sides are comfortable with the transaction that the money is released. In this case, you put the information into the blockchain, and when both sides agree that the information is accurate, it becomes locked into the blockchain.”
Tokenisation a way to get onto property ladder
Home loan approvals from banks have also become increasingly difficult because banks are becoming less risk-averse and asking for lower loan-to-value ratios (LVR) from their applicants, according to Mr Matias.
Using blockchain technology however, prospective home buyers who cannot afford to buy properties in Sydney or Melbourne could purchase a portion of a property (known as tokenisation) through smart contracts, which could increase accessibility and combat housing affordability constraints, he said.
“Through simple analysis on blockchain, you own a token that is worth a fraction of the property, which means your client suddenly needs $50,000 instead of $1 million,” Mr Matias said.
“They still get all the security but it’s on a portion of the property.”
While noting that the tokenisation of properties has not become mainstream in Australia, Mr Matias said he has been involved with three such transactions.
Mr Matias will elaborate on these topics during his session at the 2022 Better Business Summit, and highlight the current hurdles in the mortgages sector, and where the “real world” and “digital worlds” could intersect.
He will also explore how blockchain technology could and will be positioned for debt and transactions in the real estate industry, and how blockchain transactions could look through tokenisation, smart contracts, and digital debt offerings.
Investors could also borrow using cryptocurrency as an asset in the future but lenders do not currently accept cryptocurrency as a form of savings and “probably won’t for a while”, Mr Matias predicted.
The Australian Prudential Regulation Authority (APRA) recently outlined its risk management expectations for crypto-backed lending and other cryptocurrency assets, and urged regulated entities that engage in activities associated with crypto assets to conduct “appropriate” due diligence.
Responding to the growth in crypto assets and the use of distributed ledger technology over the past few years, the regulator said it expects regulated entities to conduct a comprehensive risk assessment before participating in activities relating to crypto assets, while ensuring that they understand and have measures in place to mitigate any risks that they may be assuming when doing so.
Last year, the Commonwealth Bank of Australia (CBA) became the first big four bank to offer its customers the ability to buy, sell, and hold crypto assets through its banking app.
UK fintech Revolut also offers customers the ability to exchange cryptocurrencies and other commodities.
Better Business Summit 2022 heads south
After the success of and positive feedback received in Brisbane and Sydney, the Better Business Summit 2022 will hop on over to Adelaide this week.
Themed “Digital Broker”, a variety of speakers will provide brokers with the tools and knowledge to harness technology to increase efficiencies and succeed in their businesses.
The Better Business Summit 2022 will be held in the following locations:
Adelaide, 12 May 2022 at the Adelaide Convention Centre
Perth, 19 May 2022 at Crown Towers
Melbourne, 2 June 2022 at Crown Towers
Click here to buy tickets to the summit for $249 and make sure you don’t miss out!
Alternatively, attend the summit for FREE by becoming a member of The Adviser. Click here to learn more.
[Related: AI to shift broker focus to value-added functions]
