Interoperability hits another snag as LEXTECH withdraws

More than $800 billion in property transactions are settled in Australia each year and PEXA currently holds around 90 per cent of the conveyancing market share.

The interoperability regime – which was scheduled to be ready by 31 December 2025 – aims to facilitate competition by allowing practitioners to transact efficiently with all other parties while subscribing only to the ELNOs they choose.

To date, the two Electronic Lodgment Network Operators (ELNOs) that have been working to be part of the regime are Sympli and LEXTECH.

However, LEXTECH – which is used by more than a third of Australia’s lenders – has now announced that it is withdrawing its application to be an Electronic Lodgment Network Operator (ELNO).

The move comes as the settlement platform welcomes a new leadership team, including CEO Peter Maloney, who has said the “economic viability” of having multiple ELNOs “does not stack up” and that the company would therefore be focusing on its core business and “advancing its market leading mortgage origination platform and settlement services”.

Maloney, who was previously the CEO of property and legal technology business GlobalX and Dye & Durham Australia, said on Tuesday (13 May): “There has never been broad-based appetite or support for a second ELNO; neither banks nor the legal and conveyancing industry have collective support for it.

“While some politicians, government agencies and property professionals might demand competition as a blanket rule, the economic viability of a 2nd ELNO simply does not stack up.”

He said that he believed that, from a security, platform, and pricing perspective, the incumbent player PEXA was “already highly regulated and performs its tasks with remarkable efficiency and reliability.”

Maloney said LEXTECH would therefore instead focus on investing in the development of its end-to-end mortgage origination platform, with value-added services and automations (including those offered by PEXA).

“Lenders, mortgage brokers and borrowers will best benefit from Lextech sticking to its’ core business and continuing to invest in the platform, offering new efficiency gains and further certainty for property transactions by facilitating real-time data exchange, seamless communication and automation,” Maloney said.

“We have a significant responsibility to Australian property buyers and sellers, and we are committed to investing in our platform and people to ensure we continue to offer lenders, brokers and borrowers’ certainty when it comes to loan origination and property settlements.

“We will continue to invest in our platform designed for lenders to make mortgage origination to settlement easier and more transparent for lenders, mortgage brokers, borrowers and their legal representatives.”

Sympli remains only challenger to PEXA

With LEXTECH's withdrawal, there is only one remaining ELNO now competing against PEXA: Sympli. The company has said it "remains fully committed to delivering choice and resilience to the market".

Speaking to The Adviser about the move, Sympli CEO Philip Joyce said: "The interoperability model has been supported by experts, such as the NSW Productivity Commissioner and legislated by Government as the only way to deliver true competition to tens of thousands of legal and conveyancing practitioners across Australia.

"The exit of Lextech from the market demonstrates the increasing need for Government to deliver on this key competition reform through the use of their enforcement and pricing powers.

"Without competition, a monopoly will be permanently entrenched in the market, meaning zero choice for practitioners and a $800 billion single point of failure."

What have been the issues with interoperability?

The Australian Registrars’ National Electronic Conveyancing Council (ARNECC) has been spearheading the interoperability regime over the past few years but paused the design, building, and testing of interoperable functionality last year in order to resolve issues raised by the banking industry.

Separately, the NSW Productivity and Equality Commission released a report last year that strongly criticised ARNECC’s ability to effectively manage the future of e-conveyancing, leading to a delay in interoperability plans.

The NSW Productivity and Equality Commission’s study highlighted significant obstacles for new e-conveyancing providers, including network effects, policy frameworks, and the high costs of competing with the established dominant player. It concluded that the current regulatory structure is inadequate for fostering competition and that ARNECC lacks the necessary resources and expertise to properly oversee the evolving market.

Arguments have also persisted that the high costs of reform (which have reportedly escalated since the cost-benefit analysis was conducted in 2020) and the low buy-in from the incumbent players make the reform untenable.

In February of this year, ARNECC outlined it was undertaking several reviews of the interoperability reform, including:

• Developing a functional scope for interoperability necessary to maintain an equivalent subscriber experience for interoperable and noninteroperable transactions.

• Providing an updated cost-benefit analysis to test whether the direct connect interoperability model continues to be the most appropriate model.

• Creating a new governance structure to oversee the review program of work.

According to ARNECC, these are expected to be concluded midyear and will be used to inform decision making regarding the “next steps for the interoperability reform” and “assist with more detailed discussions with Commonwealth regulators”.

However, NSW and Queensland governments – the first two jurisdictions to enable users to choose which e-conveyancing platforms to use when settling on property – have both reaffirmed their commitments to deliver interoperability in their states by December 2025.

Speaking in February, the remaining challenger player in the ELNO regime, Sympli, said that the interoperability regime was “critical” and would deliver significant benefits for consumers, small businesses, and the Australian economy.

Sympli CEO Philip Joyce said at the time: “This reform is long overdue to deliver genuine choice for customers and more resiliency for Australia. While we welcome and support the next steps, we must collectively move with more urgency and focus on execution.

“Importantly, the incumbent monopoly needs to be held to account to its regulatory obligations and ARNECC to delivering these next steps by mid-year.”

ARNECC is separately undertaking a review of the e-conveyancing regulatory framework to address stakeholder concerns raised during the review.

[Related: Treasury minister slams delays to interoperability]