Kanetix Snaps Up RateSupermarket.ca

Kanetix-RateSupermarketFor the past few years we’ve written about how rate comparison sites will permanently change the industry. They’re becoming a first stop for tens of thousands of Canadian mortgage shoppers and will someday become a vital distribution channel.

Now, the biggest Canadian mortgage rate site of them all, RateSupermarket.ca, has just been bought. The acquirer is Kanetix, a former competitor to RateSupermarket.ca and Canada’s top online insurance marketplace.

Kanetix CEO Yousry Bissada wouldn’t disclose what the purchase price was, other than to say it was “not a small sum.” He added that RateSupermarket.ca was worthy of its price tag as the leader in its field.

RateSpuermarketHe’s likely buying at a much lower valuation than some of these sites will fetch in 3-5 years. “We are still in the infancy (of rate comparison sites),” Bissada says. “In Canada, the rate comparison market is going to get much bigger.”

Already, he’s seeing considerably more interest from brokers who want to participate in ComparaSave.com and RateSupermarket.ca.

Kanetix has hired the entire RateSupermarket.ca staff. Bissada says they intend to stick around long term to help the site grow.

The move leaves RateHub.ca as the only other major competitor remaining. All the other rate comparison sites are a fraction of the size of RateSupermarket.ca with a tiny portion of its search engine equity (ranking). Those other sites include ComparaSave.com (also owned by Kanetix), Ratesheet, Ratebot and Zoocasa, among others.

Compared to RateSupermarket.ca, RateHub.ca is focused primarily on mortgage content. It’s a force as well, however, with even better search rankings for certain keywords.

Yousry-BissadaHere’s more from Yousry Bissada, Kanetix CEO…

  • On future companies in this space: “As companies like ours grow, we’ll get the market’s attention…The banks will be there, but they’re often last. They’re the ones that don’t want to change the existing world as much, but often when they jump in they jump in quite quickly.”
  • On why Kanetix wanted to buy another rate site: “We have ComparaSave and Kanetix but both are relatively new in mortgages. Rate Supermarket is well established. When you make an acquisition that is directly in line with where you want to go, it collapses your timeline and you get there a lot faster.”
  • On why Kanetix needs a third rate comparison website: “(To answer this) the best example I know of is Future Shop and Best Buy. They’re owned by the same people. Their strategy is: You go into one and get a price and then go into the other. Now you’ve done your shopping, you know you’ve covered a large portion of the market and have the best price possible. They don’t care which store you buy from.”
  • Why Kanetix bought Rate Supermarket in particular: “Rate Supermarket is the most formidable and most established in online mortgage leads. If you’re trying to collapse the timeline you’re going to buy the one that’s furthest ahead. The second part is that you have to do a deal that they will say yes to. On top of that, Rate Supermarket established us in an area we’re very small in: credit cards (a key focus area for Kanetix).”
  • Why Kanetix couldn’t just invest in its own sites: “Clearly, sites like Rate Supermarket are not going to sit on their hands. They’re going to evolve and grow so if you try to compete against them, you’re taking a piece of the pie, which is ever-growing. If you buy them, you get a much bigger piece of the pie…”
  • On how this will affect the Kanetix / Invis / Mortgage Intelligence deal: “This is unrelated to the Invis and Mortgage Intelligence deal. Kanetix will remain exclusive to them. In time we hope there will be more people willing to join as partners.”
  • On measuring success: “If you’re getting 1-2% of unique visitors turning into customers, you’re real good. You’ve got to see thousands of deals (to close a small amount). The difficulty of online is two things. One, you’ve got to drive a lot of traffic. And two, once they’re there they’ve got to trust you to keep going through the process and buy from you. Conversion rates are small when you are good, but tiny if you’re not good.”

alyssa-richard-ratehubFrom Alyssa Richard, CEO RateHub.ca

  • On the benefit of owning multiple rate sites: “Rate sites drive so much traffic from SEO. But it’s hard for one property to have more than one listing in a top position. You can think of having different web properties as shelf space. This was a strategy employed by Bankrate in the US, who bought up multiple web properties in different verticals.”
  • On how she sees the market panning out: “In the U.S. there are three publicly traded companies doing lead generation…There can be more than one successful mortgage comparison site in Canada.”

Ron-ButlerFrom Ron Butler, Butler Mortgage (one of RateSupermarket’s biggest customers)

  • On Yousry Bissada: “Yousry Bissada is someone who spends his time thinking about the future of the mortgage industry and putting down bets on where he thinks the trends lead, maximizing the value of the ‘fresh new idea’ and then selling out at the right time. Just look at his history.”
  • On the value of buying RateSupermarket: “This is an example of experienced, successful business people putting down hard cash to purchase new distribution models for mortgages and other financial services…I would hazard a guess that…Yousry quickly discovered that the execution and cost requirements to get to the top of the Google Search term ‘best mortgage rates’ made it attractive to just buy Rate Supermarket.”
  • On how brokers should react: I think it’s important that mortgage brokers smarten up and quit wishing this kind of on-line information would just disappear. Brokers should start thinking about how their present business models will work in a world of shrinking mortgage origination and discounted mortgage rates.”

Dan-EisnerFrom Dan Eisner, CEO True North Mortgage (another major online mortgage player)…

  • On whether rate sites are now in play: “I do think that corporate Canada has seen the value in these websites and will probably try to roll up (acquire) several of them. I wouldn’t be surprised if RateHub was next on the list.” (Eisner spends significant sums on online lead generation and has a close relationship with RateHub.)
  • On rate site customers: “To process online leads you have to have a whole organization. And you have to be good at it because these leads are not as profitable (as offline business).”

Full disclosure: CMT is testing its own rate comparison portal, with plans for a summer launch.

Rob McLister, CMT

  1. Brokers should be concerned. If these sites merge it gives them more pricing power when charging brokers for leads. The more dependent brokers become on them, the more power they have.

  2. In the scheme of things there are really very few brokers even using rate sites let alone depending on them. The real effect of these sites is pushing rate information to the public. They change the publics understanding of what rates they should expect.

  3. If you’re a hotel and you’re not on Expedia, you’re toast. Eventually the same may be true for brokers on rate sites.

  4. Brokers need to pick up the phone and make cold calls. Lead generationfrom online sources is helpful but can be expensive.

  5. If you truly believe it’s all about price let me ask, do you drive a FORD fiesta?
    In the absence of value the consumer will choose price and why wouldn’t they, they don’t know any better. It’s time brokers started adding some value! Any monkey can take a mortgage order!!

  6. Surely you can come up with something better than the old Volkswagen / Ford Fiesta line. It’s so tired and so silly.
    What this is about is getting exactly the same suite in the Bellagio in Vegas for $300.00 dollars less a night from Hotwire.
    I have said the same thing over and over: if you are so proud of the advise you provide your clients give all with the same option: 2.89% 5 – year at Scotia and you will sit with them for a couple hours and impart your wisdom and you will put them in your database and send them gardening tips by email in the Spring or send them a reminder every quarter to be sure to make lump sum payments OR 2.74% 5 – year same Scotia mortgage (exact same contract) everything is done on line you will never meet them and they will still be in the database and get the reminders.
    Have some guts: give them a choice.
    Oh, what’s that sound: crickets chirping?

  7. that is such a load of crap. The fact is most (not all) mortgages are very similar. Your not selling cars, your selling debt and debt comes down to price!

  8. Ron / cjr,
    You guys seem to think that laypeople know everything about mortgages. In my experience laypeople have no ability to compare the fine print in mortgage contracts. You downplay these things and try to commoditize our industry. Just wait until your customers come back at you because you didn’t properly explain the hazards of the product you sold them. For 99% of the population there is no substitute for good advice.

  9. Same old wheeze: you’re selling bad product, lay people don’t know anything.
    Heck: even the wording you use is so condescending, the public are just “lay people” and we’re the mortgage broker priests with the secret knowledge. Do you think the well educated, high income people who use these websites think of themselves as lay people with no ability to compare financial products or read commitments?
    Why don’t you take out a billboard in your area: CALL ME NOW: YOU ARE ALL TOO DUMB TO UNDERSTAND MORTGAGES
    Come off it. 99% of the mortgages we market are same lenders every single mortgage broker uses: Scotia, National Bank, MCAP, Street, TD, just lower rates. Same mortgage, same features, same contract provisions.
    Just wait until your customers start asking you about the rate of the product you sold them. Try explaining why exactly the same mortgage is 10 bps higher. Tell them it’s because 99% of the population need the high priest of mortgages to put his blessing on the contract.

  10. haha… Ron, you crack me up. If you want to give up half of your commission to buy the rate down, that’s up to you and clearly it works for you. You have proven that you are being compensated proportionate to the value (or lack of) you offer. Congratulations!
    Cjr, thankfully I’m not selling cars, and as for the comment about selling debt, I’ll leave that to the banks. If I use your same logic, buying an investment vehicle like a mutual fund, stock, etc… it would come down price. Really? In that case, I have a great fund that will provide you with a 35% rate of return. haha

  11. Ron, no need to defend your position. For some reason the thought that someone out there might actually value advice and service upsets you. It’s okay…

  12. You are making the blanket assumption that when a independent mortgage broker sits with a client and spends multiple hours lecturing their client on mortgage wisdoms, that the client comes away better informed, served and rewarded.
    That is as much the exception as it is the rule!

  13. Using rate sites is a slippery slope. While the early adapters will see a large increase in business, when the rest of the world catches on, we are back to square one (lowest rate wins, which means whoever buys it down low enough wins). Be careful what you wish for as there is always someone willing to go lower for the business than you are!

  14. It’s not about being too dumb to understand mortgages. You know that Ron. It’s a matter of people not having to time to learn the nuances of each mortgage out there.

  15. Ry, that is finally an intelligent comment. But here’s what you find once you start doing this, its just so hard to do this profitably based on the cost of the leads versus a low commission rate that when a newcomer arrives on the scene with a super-low rate they are soon looking at such a large invoice for the leads combined with low conversion and reduced commissions they just give up after a week or so. I know many brokers don’t believe this but just try it for a few weeks and you will see.

  16. I don’t really think there’s a right or wrong answer to this debate, and we can argue one way or the other until we’re blue in the face.
    Here’s my take on this; when I used to work in restaurants as a server, I had to read the customer sitting at my table. Some of them wanted no interaction at all with the server, and just wanted you to take their order, and make sure the food tastes good, and their drinks are filled. They weren’t interested in having a conversation with you. Whereas, you’ll get other tables who will engage you in conversation, and I’ll find myself answering questions, and making recommendations, and by the end of the night, I’m their best friend.
    My question is, can we as brokers have a model that caters to both? When you talk with or meet your client, you need to be able to read them. Are they the type of person who knows what they want, and doesn’t need advice or suggestions? if so, maybe buy down the rate since you’re not going to be spending a lot of time on this file. Or, is the borrower someone who needs a lot of advice and guidance like a lot of first time buyers. If that’s the case, then give them what they want and need, but choose not to buy down the rate?

  17. Mortgage terms are not all the same. Ron you do people a disservice by promoting that. In Ontario, brokers who push low rates and don’t properly advise clients are liable to FSCO for selling unsuitable mortgages. I would love to see FSCO crack down on this.

  18. There is another angle here that hasn’t been mentioned: Lenders are placing increasing importance on funding ratios and are adapting their compensation models to pay more to brokers who close a higher percentage of the applications they submit. I have to believe that discounters have much lower funding ratios and if that’s true, I think the day will come when they will be starting with a materially higher rate than those offered by top-notch full service brokers. This will help neutralize the willingness of discounters to cut commissions to buy down rate.

  19. David, although few rate discounters would tell you they have 75% pull through; when lenders are getting $200 Million of Volume, they will make rational business decisions. The other key element is that most rate discounters work from a central underwriting model, so even if pull through rates are down the fact that the lender has the ease of communication and quick response time of dealing with only one or two human beings for the $200 million of volume ameliorates the ratio problem.

  20. Fair enough Ron. I could see the model working much better for established brokerages. I could also see it generate other business (Alt business {for clients who do not qualify for prime pricing although all clients think they should}, MPP/Insurance) that would help the brokerages bottom line and make up for reduced finders fee. I am just concerned we are all going to get caught in the race to zero and end up giving more power back to the big 5 (yes, I know scotia and TD are major broker lenders but no guarantees they always will be). Just my two cents…

  21. Don’t put words in my mouth. I’m not making any assumptions. I’m merely saying that good advice is highly underrated when it comes to picking the best mortgage. Not all mortgage differences are visible on the surface.

  22. Why do you think full service broker advice is underrated? If you’re offering mortgages @ 15bps above a discount broker, that is an extra 3K on a 400k, 5yr/fixed. That’s fine but explain how 2 hrs. in your office listening to you spout off mortgage wisdoms is worth 3 grand?

  23. This may seem like a stupid question, what if Lenders start using these rate sites for leads and buying down the rates by the amount they would have paid a broker and have the mortgage approved inhouse? Its hard to compete if a lender is willing to out bid brokers

  24. Hi Jon,
    That’s a very prescient observation actually. I’m quite certain that one or more lenders will try that very model within a few years. The customer would likely get less advice and service than they would with a commissioned bank rep or broker, but some people are fine with that trade-off if it means extra rate savings.
    Whether it’s ultimately in the client’s best interest is whole other debate. It’s certainly not a model for borrowers with very little mortgage knowledge or atypical circumstances (e.g. applications requiring exceptions or those involving rental properties, stated income, credit issues, etc.).

  25. Hi Rob
    I think with cookie cutter applications for experienced buyers who are rate conscious these rate sites could be an avenue for Lenders to circumnavigate the broker channel with heavily discounted rates. As technology improves it will become easier for lenders to compete on convenience & rates and have an almost immediate opportunity to cross sell other products in one online virtual appointment. I believe rate sites are a great tool for clients, but if Big Banks step in they may become simple referal sources for inhouse teams.

  26. It is a great question, one I think about a lot. I don’t see the big banks doing it anytime too soon. They had ING to look at for many years and decided not to do it. Scotia will keep Tangerine going but I doubt anyone else will jump in.
    The monolines would seem to be the logical bet to try it but two problems come up. #1 – the monoline who chooses to try would see their broker share go to zero in 72 hours. #2 – it’s expensive, brokers can build a business with bubble gum and string, we know how to do things on the cheap. Monolines are big companies, they look at the ROI of website rate discounting and say “no” because they have investors and shareholders to satisfy with immediate profits.
    There is a reason Amazon is the leader in online retail and Walmart, Costco and Target are in the game but not fully engaged: they don’t want to cannibalize their own infrastructure. Amazon is often called a charity with distribution centres attached because even now it makes a very small ROI. Same issues apply to existing lenders. Too risky for not enough return.

  27. Hi Ron
    You make some valid points, with potential lenders looking at how ING performed as a mainly online producer. With mortgages/HELOCS becoming more difficult to fund lenders will be looking to cross sell more into more profitable products. I believe, that it will start as a a promotional offer where a lender/s will test the waters to see their ROI. My thought was that lenders would pass on the savings to clients from not paying broker fees. This is happening today in other businesses, i bought something from chapters for $50 & online it was $25, here’s their statement on why this occurs. When you purchase items online, we ship directly from our warehouse to you. That means we can bypass the significant costs associated with maintaining the store experience you love and pass those savings on to you.In-store, you’ll find our price will match or be lower than the publisher’s list price.
    Like it or not broker fees are a lender expense, and the savings could be potentially passed on to the consumer. As these rate sites gain more traffic, it wont be long before one lender decides to test the water

  28. I appreciate your comments Jon, I think there may be some attempts by lenders but likely fewer than we think. Rob’s idea about CUs or new monolines jumping in makes more sense.
    Here’s the thing: the mortgage product is highly competitively priced right now so there is no way to cut rates by 50% like a retail product, it’s impossible to “wow” anybody. So the low margins will force operators to work on the thinnest cost structures with limited scope to cross sell other products.
    Big companies hate those scenarios, only upstart dreamers are willing to take the risks. Like Jeff Bezos chucking his Wall Street job and driving to Seattle with an idea every one of his friends thought was nuts.

  29. Actually, studies show the DIY investors that buy a very low MER cost ETF outperform those that pay bricks and mortar mutual funds any day. I’ll take a Butler or TNM or Advent or even Dominion L. C. over your so-called full service but pay 15+ more bases points for a mortgage – ANY DAY ! You’re so-called ‘service is redundant, outdated, and commonly found on-line, and/or in any business section of any non-Sun Media or any non small town news source.

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