New technology firms kept out by lenders unwilling to change systems
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Lenders have been accused of shutting out new technology firms trying to compete against Mortgage Brain and TrigoldCrystal because they prefer to stick with businesses they already have shares in.
In the Office of Fair Trading’s report on why it referred the merger of Mortgage Brain and Trigold Crystal to the Competition Commission, it says feedback suggests lenders are reluctant to integrate their systems with new technology providers’ trading platforms.
Mortgage Brain is owned by six lenders Santander, Barclays, Lloyds Banking Group, Nationwide, Northern Rock and the Royal Bank of Scotland.
TrigoldCrystal’s shareholders comprise private individuals, Prudential and Santander.
In its report the OFT says: “With respect to the electronic trading platform market, a few competitors active in other mortgage software markets informed the OFT that integration with lenders’ systems is difficult, making expansion into this area impossible.
“They complained that while the merging parties are permitted to integrate their software with their shareholders’ systems, smaller companies are not given the same access.”
The OFT says lenders have an incentive to support just one electronic trading platform because of the significant transaction fees and support costs they incur.
One of the main reasons the OFT referred the merger to the CC was because the deal would have created a lack of competition as new entrants struggle to access the market.
Martin Colyer, joint chief executive officer of TrigoldCrystal, says: “We hope one outcome of the OFT report will be to encourage lenders to support more platforms for new business and therefore create more competition in this area.”
The OFT estimates that TrigoldCrystal’s share of the mortgage sourcing market is 50% to 60% and Mortgage Brain’s is 30% to 40%.
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