Property markets suffer an inherent problem: any real estate agent is a middleman. Blockchain will change all that. Digital Asset Live Editor-in-Chief talked to John Reynolds, Coadjute CEO. He presents what has been done already the major players, his project includes NatWest, and what is yet to do at the UK property market with distributed technologies.
Q1: What is the problem you are trying to solve?
A1: Consumers don’t want estate agent services, broker services, lending services, legal services – what they want is to purchase a new home. The problem is the single transaction that the consumer is trying to complete consists of five core sub-processes (brokerage, estate agency, lending, conveyancing, and surveying), all of which are provided by different businesses.
This lack of service and process integration, whilst painful for the customer, results in significant additional costs, risks and lost revenue for the Banks and other businesses involved. The situation is that each business incurs costs for executing their individual process (e.g. mortgage process) but don’t get revenue until the overall transaction is complete; their revenue and profitability is wholly dependent on the completion of an overarching transaction of which they only control one fifth.
Q2: Who owns and is responsible for the overarching transaction?
A2: It’s a great question with perhaps a surprising answer, which is no one owns the overall transaction, yes the transaction which everyone depends on is controlled, measured and managed by no one. Effectively the businesses that depend on the overall transaction have outsourced the integration of their individual processes to their shared customer. As someone who has spent all my life in digital transformation and outsourcing this breaks the number 1 rule which is never, ever outsource/give up control of your core processes and transactions.
Imagine if we were starting with a blank piece of paper and an executive in one of the businesses went to their board and asked the following question:
We have a transaction which is absolutely core to the success and survival of our businesses, should we:
A: Do our bit and cross our fingers whilst others do their bit,
B: Do our bit and hope our customer does the rest, or
C: Proactively, Integrate with our partners so we can collectively manage and measure the overall transaction?
What do you think the answer would be?
And yet in the home moving and mortgage market, businesses are stuck somewhere between option A and option B, leaving customers with the painful, frustrating, stressful and complex task of stitching together the processes of the individual businesses into an overall transaction.
Q3: What’s your solution, what will various groups of clients be able to do, of what they cannot do today?
A3: Coadjute and our consortium partners have a simple vision of transforming the UK’s mortgage and property marketplace so that consumers can get a mortgage and move home in one simple, fast, secure and fully integrated digital journey.
To realise this vision we have done three things; established a governing consortium, built a distributed ledger network and integrate leading platforms across each stage of the home buying transaction.
We have finished the MVP product which proves every actor gets value from working together to share information, integrate and optimise processes along the home buying journey, and that customers are delighted with a fully integrated experience that lifts the heavy burden of process integration off their shoulders.
Q4: Why Blockchain? Couldn’t one centralised platform solve this problem?
A4: Yes, a centralised platform could, in theory, solve the problem, centralised platforms have solved similar problems in other industries. Take travel for instance, we started off with the conventional way where customers had to book flights, hotels etc separately and then came Expedia which aggregates all the services.
So people have tried to apply the centralised single platform theory to this problem, and in theory, it makes sense, but practically millions of investment has gone into high profile projects dating back over the last 15 years that have proved the approach doesn’t work e.g. the UK Land Registry Chain Matrix platform (2006), the Law Society Veyo Platform (2015) both of which failed to gain adoption. Despite this, people persist with this concept of a single centralised platform aggregating the market.
The issue is that there are already establish platforms in each one of the verticals and the established platforms value proposition is based on customer relationship, customer data and workflow so any “platform of platform” data monopoly that tries to disrupt incumbents by aggregating and monetising their customer relationships and customer data is going to meet resistance.
With Coadjute, we are not looking to disintermediate or disrupt existing platforms, we don’t aggregate or hold data and we don’t seek to shift the customer relationship. We have built a distributed ledger network that enables businesses in the end-to-end home buying process to join-up their systems so they can connect, interact and transact directly; no data aggregation, no customer relationship shift, no disintermediation. With Coadjute every platform and business that connects to our network sends data peer-to-peer, think about the data that is sent today over email being sent as part of a peer-to-peer inter-organisational business process.
Q5: Which Blockchain Platform do you use and why?
A6: We use the R3 Corda Platform. After a year of research of all the public and private platforms, we decided to build on Corda as its privacy, security and scalability was the best technology for connecting up the home buying process. In true terms, Corda is not a blockchain but an enterprise distributed ledger solution that enables peer to peer communications.
In addition to the technology, Coadjute is part of the R3 EIR programme, an incubator programme for start-ups building on Corda. The programme enables us to work out of the R3 offices in London were our technical and business teams can directly collaborate with the R3 platform and product teams; this partnership has enabled us to deliver at an exponential pace over the past 18 months.
Q6: What will various groups of clients be able to do, of what they cannot do today?
A6: The first thing that the Coadjute distributed ledger network brings to the users of the platforms that are connected via the network is transparency over the end to end transaction. If you think about the home moving journey as five interlocking processes that need to share data and events so that the entire transaction can complete. Today, the actors on the various different platforms share limited amount of data and reconciliation is done over email and telephone, often with the customer having to chase around to get status updates. Additionally, the customer has to give the same information to each actor; slow, painful and frustrating.
With the Coadjute network each system is connected on a distributed ledger, where the business logic in the smart contract ensures each party stays in sync and because we use the corda point to point distributed ledger parties can share documents, data and even cash in real-time point to point over a highly secure and private network; this reduces costs and risks while increase increasing revenue.
Q7: There’s been lots written about tokens and real estate, does this feature in your solution?
A7: We have not ventured into the real estate tokenisation space, it’s a use case that generates lots of debates as to the actual value proposition, certainly JLL and MetaProp have been vocal stating that there is no business case.
For us the real opportunity with enterprise tokens is representing payments on ledger, and in our global trial we used primisory notes to settle the mortgage and participant fees atomically at the point of exchange. In our most recent MVP, we are focusing on getting the basic infrastructure in place, streamlining and optimising the process to improve customers experience, remove cost and generate more revenue for participants. We then plan, in Q2, to introduce enterprise tokens to enable participants to transact on ledger, this will radically reduce fraud, reduce risk and open up the opportunity for weekend completions.
Q8: You talk about building natively on Web3.0 and Hyper-automation, what will this future look like?
A8: As we have discussed, the “platform-of-platforms” approach to joining up the property marketplace has failed numerous times as the marketplace is naturally decentralised. So what we have seen is attempts to create an overarching data monopoly using Web 2.0 mindset and technology is going being resisted; I think businesses are really mindful of the threat of big tech companies and therefore creating a huge data monopoly that could be bought by one of the big tech giants and strangle competition in the industry is on the risk register of many market incumbents. Secondly Web 2.0 has had some real challenges over the past few years with huge security breaches of centralised data platforms, and exploitation of consumer data in the data analytica scandal, so for us we believe the web2.0 phase is nearing its end.
At the core of Web 3.0 we have peer-to-peer networks, self-sovereign identity, artificial intelligence, value exchange and trust and transparency; the Coadjute network is natively built on web 3.0 tech stack.
For us, we can enable businesses connected to our network to give their customers the same experience as one huge data monopoly, without hoovering up their data or undermining their business model. But achieving this fully integrated journey that gives end to end transparency (basically the web 2.0 holy grail) is just the start for us, it’s in many respects the basic foundation connectivity of web3.0 that opens up a world of new possibilities. Once the ecosystem is connected using a peer-to-peer DLT network, we can start to achieve huge business efficiencies as smart contracts deliver what Gartner hyper-automation across the ecosystem, where machines execute automated inter-organisational business process and payments in real-time. For the consumer, self-sovereign identity will mean a friction-free highly secure digital transactions free of all the risks of fraud inherent in today’s web2.0 approach to identity sharing and money transfer.
Q9: Tell me about the Instant Property Consortium.
A9: The consortium consists of a group of software businesses and a mortgage lender who have come together to pursue their shared vision of transforming the UK property market to enable consumers to get a mortgage and move home in one simple, fast, secure and fully integrated digital journey.
The business involved include NatWest, Dezrez Estate Agency Software, Redbrick Solutions Conveyancing Software, eTech Surveyor Software, Search Acumen Property Data, Conveyancing Data Services Property Data, and LMS Panel Management Software.
Dan Salmons, Director for Mortgage Innovation at RBS, said: “We are committed to using the latest innovations to build new solutions for our customers that improve our customer’s lives. The home buying process is an area ripe for improvement, however, real change can only be brought to bear if we bring all the parties involved together. This is why this project and consortium is such a crucial step and if it is successful it will be a game-changer for our customers and the entire property market.”
Richard Price, Managing Director of Dezrez, said: “One of the biggest stresses in the home buying process is a lack of transparency for consumers – everyone hates not knowing what is going on. Whilst estate agents, solicitors, surveyors and banks are working hard in the background the consumer is unaware of progress. The Rezi platform was built to break down these barriers by utilizing modern technology to connect disparate software systems. We are excited to be part of this innovative group of companies with one aim; to create an end-to-end customer journey. As a result, estate agents will be able to continue to provide their customers with valuable information and benefit from a speedier sales process”.
Christian Woodhouse, Head of Data and Strategic Products of Search Acumen, said: “We’re in a very exciting time for property/PropTech innovation where we’re able to back up the market hype around distributed ledger technology with meaningful action.
“Anyone who has bought or sold a property understands the frustration of the painfully slow and complex process that relies of inefficient, often paper-based correspondence between lawyers. We’re pleased to be part of a collaborative, forward-thinking project that could significantly improve the efficiency and transparency of the property transaction process for lawyers through digital innovations.”
Q9: And finally tell me what 2020 holds and when will the platform be live?
A9: We have completed the development of the MVP product which we are just preparing to test with customers of consortium members e.g. home buyers, estate agents, conveyancers and surveyors. From this evaluation, we will gain further insights and then commence the pilot stage.
The pilot stage will build an alpha release of the platform which will transact live fully integrated digital property transaction, this will happen in Q2 and then by Q4 we plan to have a Beta version of the platform live.
In addition to moving to pilot and production release of the platform with existing consortium members we are onboarding cohort 2 of consortium members which we will be announcing over the coming weeks, watch this space some big names a joining.
The journey to connecting up the naturally decentralised and distributed property and mortgage markets with distributed technology has genuinely begun!