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Daily bite-sized proptech and property news in partnership with Estate Agent Networking.
Coadjute to launch UK’s first mortgage stablecoin in with blockchain provider R3
Coadjute, which seeks to pave the way for full digital completion of property sales by increasing transparency and efficiency, reducing fraud, and transforming the customer experience, made the following announcement through a press release:
Coadjute, the real-time network that connects the property market, has announced plans to enable retail banks in the UK to issue a mortgage stablecoin on their network, working in partnership with global technology firm R3.
The service is set to vastly improve the movement of mortgage funds, which amounts to over £240bn each year nationally. Stablecoins issued on the Coadjute Network will be the first UK Retail Bank stablecoins and the first in the world expressly designed to speed the completion of mortgages.
It is further evidence that the UK is the global leader in the development of digital currency. The UK government’s Chancellor, Rishi Sunak, recently named Central Bank Digital Currency (CBDC) on a list of priority financial reforms for the Treasury. This follows his set up earlier in the year of a fintech taskforce to investigate a Bank of England CDBC or ‘britcoin,’ which would revolutionise the way money moves around the UK monetary system. Coadjute’s move brings the same technology to the process of home buying and selling.
The current process for completion of a property transaction has seen little innovation in the last 20 years. Multiple parties move large amounts of money between a complex array of accounts, often using email and phone calls to communicate and check details. This creates high levels of administration which frequently cause last-minute delays in completion, and the familiar “Friday afternoon rush.” The traditional process is also vulnerable to fraud.
Coadjute’s new approach is to enable mortgage stablecoins to be issued on the Coadjute Network. The stablecoins are purpose-built for mortgage completions and transform the efficiency with which funds can be moved and settled between the parties involved in a property transaction, including mortgage lenders, conveyancers, and estate agents.
Coadjute’s approach provides a ‘single source of truth’ simultaneously to all parties involved, removes the need for continuous manual reconciliation, and significantly cuts the risk of fraud. The use of mortgage stablecoins on the Coadjute Network also lowers costs by moving funds over the network and not solely through traditional payment rails.
For banks, they can better manage their liquidity positions and forecasts on mortgage inflows andoutflows and reduce the potential for fraud from Authorised Push Payments (APP).
John Reynolds COO of Coadjute says “The opportunity to reduce push payment fraud is particularly significant. We enable conveyancers to continue to manage transactions but without having to take on the risk of holding cash in client accounts. This in turn could unlock lower Professional Indemnity Insurance premiums, potentially by more than 15%, a significant saving for a sector struggling with recent PI insurance increases.”
The Coadjute network is based on R3’s Corda enterprise blockchain technology, which lies behind many large-scale financial networks, including Italy’s Spunta Banca DLT solution, which is used by over 100 Italian banks for settlement, 91% of the Italian banking market. In its first 6 months, Spunta Banca DLT processed 204 million transactions transforming the interbank reconciliation process.
Dan Salmons, CEO of Coadjute said: “Blockchain technology is no longer just about cryptocurrencies, and is now being applied to highly regulated environments such as Central Bank Digital Currencies. Coadjute’s mortgage stablecoin represents the ultimate in control, having been designed expressly and solely for the completion of mortgages.”
“It is truly programmable money, with built-in rules that prevent it ever being used for anything other than the precise property transaction it was meant for. Our stablecoin will enable a much smoother process for property completions along with unprecedented security. It truly is a breakthrough in the property market.”
Cathy Minter, Chief Revenue Officer at R3 commented: “R3’s Corda technology is perfectly suited to support Coadjute’s work to provide friction-free, secure transactions for the property industry.
Distributed Ledger Technology (DLT) has demonstrated its value in transforming industries time and time again – Coadjute’s use of DLT to connect the property market is no exception.
“We look forward to continuing our work with Coadjute on the next generation of property market infrastructure as its network grows.”
As well as being highly secure, the Coadjute network completion process is simple:
1. Funds are locked in bank accounts
2. Mortgage stablecoins are issued onto the blockchain ledger
3. Respective parties involved in the transaction can then request, exchange, and track the stablecoins from within their existing software
4. Once agreed, the completion time can be programmed to take place at any time 24/7
Coadjute aims to slash the time to complete a house purchase in half by connecting the disparate parts of the home-buying process. After three-years of development involving Banks and HM Land Registry, it announced the network was live in July 2021. Last month, it announced that two-thirds of the software used by estate agents will be connected to the network. Coadjute will be running trials of the new Mortgage Stablecoin service in November with a number of major UK mortgage lenders, along with providers of legal and banking software.
At Proptech-X, we have been following Coadjute’s journey since its inception. Knowing the founder team, we feel that they are bravely looking to do something big and of lasting value for the residential sales market, which is slow, opaque and needs to be digitally knitted together at speed.
Navigating the huge proptech investment sector
It’s ironic that in 2021 the UK is a leading force in property technology, moving eye-watering levels of finance with vast sums being raised and spent. However, very few in the space know exactly how to back a winner.
Since 2017, and through to mire of the pandemic – where digital and real estate across all of its verticals finally decided to get it together – we have been deeply involved with many founders, and increasingly with the ‘money men’.
It seems glaringly obvious that proptech companies cannot articulate their value or even often their solution or scalability, and the people holding the money are finding it hard to value the opportunities put before them.
As one pundit, who wishes to remain anonymous, told me recently: “Putting an accurate value on a non-tech business in the old days used to be just a case of multiplying the EBITDA, with proptechs it seems to be, look at gross profit and multiply it by up to 80 times and pray.”
Part of the reason that proptech companies are hard to value is that SaaS companies have scaled up by a multiplier of five since 2018, which means that their ultimate values are often going to be hard to realise at the exit stage.
Another anecdotal nuance that is also creeping in is that in the VC space especially, the sentiment “we did not invest because we didn’t understand it…look at them now” is becoming increasingly common, a reference to the fact that VCs had been pitched the next big proptech thing and were unable to see its value and scalability.
Proptech companies are strange. Often their founding team feel in some way that the usual commercial models that apply to any start-up somehow do not count for them. It’s as if they are developing a solution that is so transformational that a paying end client just is not a factor.
Many of the founders or CTOs are almost evangelical about the tech, but maybe an A level in business studies would tell them that what they were pursuing is a commercial dud.
Talking with a senior in A/M recently, I asked how he picked their winners. Their response was that fire sale businesses were the best value; low value, low expectation. But with the correct team put into place some return is guaranteed.
To my mind, there must be a better way, and if talking to hundreds of proptech founders has taught me any wisdom it is these things:
- Successful companies insulate their tech team who are building the solution by having enough capital to scale up.
- Having a commercial partner early on keeps their enterprise grounded in solving the key problem of merit.
- From day one all proptech companies should be thinking about their exit strategy and be ready to grasp that opportunity before it passes them by.
For those holding the capital, my advice is far simpler. For a better return on investment, get hold of specialists who really know what is happening in the proptech sector. They hold the key.
October 1st spells the end of the SDLT holiday & furlough
As the winter weather sets in there is also a chilly wind of change blowing across the residential estate agency industry. Stamp duty is fully back in place and up to 850,000 people will no longer have the security of the furlough scheme.
It will be a few days before the scores are in regarding the sales activity in September 2021; that is sales of property agreed for September, rather than completion sales agreed earlier in the year.
Will it be the case that there is a willingness to buy property, but no stock of property to feed that need?
A little like petrol, there is no shortage. Yet, the reality is with no petrol at the pumps the queues are still forming, and you cannot buy any petrol for love or money.
Historically the housing market hibernates from late October until mid-January, so it may be a game of wait and see until 2022 before we really know the shape of the housing market moving forward.