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Electronic conveyancing (e-conveyancing) and property settlement organisation Property Exchange Australia (PEXA) has flagged concerns about the viability of the current interoperability model to the House of Representatives’ standing committee on economics inquiry into promoting economic dynamism, competition, and business formation.
Speaking at a hearing yesterday (31 August), PEXA’s chief customer and commercial officer Les Vance said that while the organisation “welcomes competition on the basis of fair and considerate policy”, it was concerned by the push towards interoperability due to its complexity.
PEXA was launched in 2012 as a government initiative, the National E-Conveyancing Development Ltd, which in 2018 was privatised and renamed to the Property Exchange Australia Ltd (PEXA).
It currently handles the majority of e-conveyancing transactions. However an agreement was made in 2021 to encourage market competition through interoperability requirements between Electronic Lodgment Network Operators (ELNOs).
The move to interoperability aims to allow each party in the settlement process (for example, lawyers, conveyancers, and financial institutions) to use the electronic lodgement network operator of their choice, irrespective of what the other transacting parties choose to use.
However, ongoing delays have pushed back interoperability to around 2025.
Mr Vance said PEXA’s network was created without the thought of interoperability and now that it was a key topic of conversation (due to the “critical role” e-conveyancing has), changes to the exchange and the e-conveyancing policy need to be designed and managed given the importance of maintaining “reliability, resilience and security of e-conveyancing as a whole”.
He stated: “No other single market has been fragmented by regulatory design then to be pieced back together again through interoperability.
“The reality is that interoperability is far more complex to design, execute and bill than was represented or assumed at the start, that’s why it’s taking time.
“That is also why even to get to this relatively early stage of two pilot transactions in September 2023, ARNECC’s (Australian Registrars National Electronic Conveyancing Council) interoperability program has already had to consider over 120 changes.”
Speaking at the inquiry on Monday (28 August), e-conveyancing company Sympli suggested that PEXA’s monopoly meant there was “no real pressure to reduce prices, no drive for service innovation and no urgency to make the network more resilient”.
While PEXA confirmed its network was used for 88 per cent of all sale and purchase transactions nationwide – and “upwards of 95 per cent” across Victoria, NSW, and South Australia – Mr Vance said the organisation encouraged innovation in the industry.
He declared: “PEXA supports a reliable, resilient and secure e-conveyancing market, it supports innovation, including making integration available to others, to customers and the providers of the services on a non-discriminatory basis so they can innovate and help support further efficiencies and better experiences for our customers, to the end consumer and the community.
“We welcome competition on the basis of fair and considerate policy. We also respect the role of the regulator.
“Clear stable policy and regulation and effective regulators are critical for investment, particularly in infrastructure such as e-conveyancing. However, in this case we are concerned that decisions and expectations have not been based on a full appreciation and critical analysis of the issues. That’s becoming clearer as we approach the pilot transactions in September. After all, to ‘a better understanding’ is exactly the reason you do a pilot.”
When asked about PEXA’s view of interoperability, Mr Vance said the organisation believed the current policy and design needed to be further developed before implementation.
He asserted: “We think that the current design does involve a number of detriments and complexities.
“It is, of course, designed to balance the innovation on one hand and the competition, stability and consistency [on the other].
“So, we support regulatory innovation, we support the element of transparency and having different participants able to provide parts of the process, but we do think the balance has been wrongly struck in the current policy design.”
Following PEXA’s appearance yesterday (31 August), Sympli’s chief executive Philip Joyce said the evidence provided at the inquiry was another “wake-up call” that the “PEXA monopoly continues to fight tooth and nail to protect their patch”.
Mr Joyce stated: “PEXA reminded us that they are driven by protecting their profits, and firm regulatory decision making is needed.
“As it surpasses more than $1 billion in revenue over the past five years, it is critical now more than ever that competition reforms are delivered as soon as possible.
“The good news for industry is that government has resolved, through independent analysis and stakeholder engagement, that interoperability is the path to successful competition.
“We look forward to the decision to enforce these reforms being enshrined in regulation and all stakeholders to continue working together to achieve these goals.”
[Related: ‘Urgent need’ to complete e-conveyancing competition reform: Sympli]
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