Moneycatcha uses blockchain to streamline mortgage applications
MoneyCatcha is using blockchain technology to make home loan applications quicker and cheaper.
One of the most time consuming and costly processes banks go through is signing customers up to a mortgage. The full loan application process can take weeks and has a significant cost. Data is often captured and manually re-entered several times resulting in potential errors and a further waste of resources. As a highly competitive part of retail banking, and perhaps its most profitable activity, being able to differentiate from other banks is critical.
Also, with increased scrutiny on loan documents as we've seen through the Royal Commission on banking, the need to be able to prove the sovereignty and accuracy of data captured on applications, and the ability to audit those documents is increasingly important.
This is where Moneycatcha comes into the picture. Its blockchain solution streamlines the loan process from origination right through to final sign-off.
MoneyCatcha's CTO, John Heaton, says MoneyCatcha started by looking at loan origination.
"Loan origination is quite a complex problem. There's multiple stakeholders. There's very long time frames - on average it takes around 42 days from the time you apply for a loan until it's settled. It's a very complex value chain of things that have to go right within a period of time," he said.
The problem is that while this is a major source of revenue for banks, it's "fraught with manual processes".
Heaton started his IT career working at Oracle when it was a small challenger brand. When the blockchain started to make some headlines a few years ago he saw it as a bit-player on the side of serious data management. But he saw, along with MoneyCatcha's founders, a way of using the blockchain as a way of managing permissible data sharing across a large value chain and use that data as a source of record.
"That 'tamperproofness' of the data and being able to create transparency is a big win".
When loan documents are sent to a bank by a mortgage broker, about 70% of that data is reworked according to Heaton. Each of those iterations on the data, created as data passes back and forth between the bank and brokers creates new versions of the data. That creates many challenges when it comes to transparency and auditing.
And that data are also augmented with data from address and credit checking services. These add significantly to the cost of processing a loan document, which, Heaton says, can exceed a couple of thousand dollars.
Each party that handles the data also rechecks and validates what they've been given, indicating "intrinsic distrust" Heaton added.
By using a blockchain solution, the question of who owns and controls the data becomes moot. The blockchain provides a secure and distributed data source where all the data are trusted and protected. As different people need access to different parts of the data, rights can be allocated across an ecosystem.
The blockchain, as applied in this way as a private consortium model, is a good way of solving this and, in Heaton's view, isn't about the use of the blockchain per se. It's about securely sharing data across different parties. And while a public blockchain could solve the same issues, he doesn't believe businesses are quite ready for that yet.
One of the criticisms levelled at blockchain systems is that transaction times are slow. And while that's true when comparing blockchain to transactional databases, Heaton said that's not the only way to look at things. He said MoneyCatcha has the concept of a "business transaction" which is the point in time exchange of information which is "settled" later. This is similar to how the stock-market works with transactions taking place in microseconds but final accounts settled later.
This approach means the old process, which was costly and time consuming, has been reduced from around 42 days to five days with a re-financing application completed in about 90 minutes. And the only reason refinancing takes so long is 45 minutes are needed to establish the workspace in the backend banking systems.
MoneyCatcha isn't the first business to use blockchain technology to solve business problems and streamline processes. There are companies in the logistics and primary industries looking at how this emerging technology can reduce process times and carve back costs.