Digital settlements provider Property Exchange Australia (PEXA) has agreed with recent comments from competitors that there needs to be more competition in the property exchange market.

Reacting to comments made last week from LEXTECH’s chief operating officer regarding PEXA’s dominance in the digital property exchange space, the company agreed that more needed to be done to improve competition for other players and benefit others in the property buying transaction — including mortgage brokers.

While the Electronic Conveyancing National Law was recently amended in the NSW Parliament to enable continued development of interoperability (which would enable different e-conveyancing systems to “talk” to each other), PEXA told Mortgage Business that there were still valid concerns being raised around the resilience of an interoperable system, and that further safeguards are required to protect consumers from prohibitive costs. 

For example, PEXA has highlighted that the economic model proposed in the draft Model Operating Requirements is “unsustainable and would put user experience at risk”.

It suggested that this was due to the fact that the proposal outlined that a “responsible” electronic lodgement network operator (ELNO) must provide settlement and lodgement services to its competitor(s) for free.

Further, PEXA has warned that some pricing framework models have been based on “inaccurate assumptions” that “fai[l] to understand the true costs and risks involved in interoperability, as well as the technical intricacies and nuances of e-conveyancing”.

It estimates the cost to introduce the bilateral method of interoperability between PEXA and another ELNO is between $96 million to $160 million, with further costs to introduce additional ELNOs into the bilateral interoperability model. If that additional ELNO is not ultimately viable, this investment by the industry would be wasted, it added.

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ARNECC and the NSW government have already commissioned the NSW independent pricing regulator (IPART) to investigate and report on a pricing framework for interoperable transactions between ELNOs (with a final report expected by April 2023). 

According to PEXA, it is expected that a second bill will be prepared to address these and other elements of the framework.

Speaking to Mortgage Business, PEXA chief operations officer Simon Smith stated: “Now that so much detailed design has been done and the complexity laid bare, [it’s] seems pretty clear that the current model of interoperability will be too costly for a third or fourth competitor to enter. 

“We don’t think this current model should be the end of competition reform. Competition is good because it makes us all work harder for our customers,” adding that PEXA will continue to play its role as part of the interoperability reform.

Mr Smith agreed with LEXTECH that more of the property settlement journey should be expanded to incorporate more players in the digital transaction.

He explained: “E-conveyancing is a small part of the home buying or selling journey. The chain involves buyers, sellers, real estate agents, conveyancers, lawyers, lenders, brokers, taxers and registries — not to mention insurance, removals and utilities. It’s complicated and can be a pain — as anyone who has bought a property knows.

“Industry and governments should now focus on the whole experience and see how we can digitally improve it for everyone’s benefit.

“At the moment, it’s a bit like a family renovating an old house. Once you’ve fixed up the bathroom, you should move on to the kitchen or the family room. You should not keep redoing the bathroom and expec[t] to get the house sorted.”