When Google starts competing in an industry things change, and often not for the better for existing competitors. Google has the wherewithal, brainpower and search engine might to capture sizable market share in virtually any product segment, including mortgages.
It’s been making mortgage inroads for a few years in the U.K. (after buying BeatThatQuote.com for $60 million CAD). And just a few months ago, word got out that Google will start comparing mortgage rates in the U.S.
The natural question is, will it come to Canada? We posed this to Google’s Head of Financial Services in Canada, Lisa Boulanger. She says there is “no news at this time for anything in Canada.”
But Google isn’t scared of small markets. If it can successfully operate an ad business in Liechtenstein with a population of 37,000, it can operate a mortgage comparison business in Canada with 35 million people closing two million residential mortgages a year.
It’s worth pondering how our market would change if Google Compare did come to Canada. Here’s some speculation on what we might expect:
Top Search Placement
In the U.K., Google’s mortgage comparison interface occupies precious real estate—near the top of search results. And it does so for mission-critical keywords like “mortgage rates.”
Its search result looks like this:
Unlike other mortgage providers, Google’s advertisement has interactive controls that invite the user to enter their mortgage size and see what kind of rates Google comes up with.
Here’s another interface Google tried in a past foray into the U.S. market:
Long story short, “Google Compare Canada” could put Google on top of most competitors, making it easily accessible to the two-thirds of Canadians who use search engines to compare mortgages.
Simplicity & Convenience
Google Compare is fast and its minimalist interface gets right to the point. Simplicity helps drive consumer adoption. And integration with Google search pages doesn’t hurt either. “Google comparison products are a major threat as they allow users to compare results without ever leaving the search engine,” notes PerformanceIN’s Tom Sadler.
It’s not a stretch to assume that Google’s rates for well-qualified borrowers would undercut most large financial institutions (at least their advertised rates). That too would drive mortgage shoppers to the site, even if only for a second opinion on their lender/broker’s quote. Clearly this wouldn’t be positive for industry margins. According to RealtyTrac’s Peter Miller: “The challenge is that Google — like Walmart — [would] push down supplier prices, the ‘suppliers’ in this case being lenders.”
With more consumers easily comparing mortgage rates on a trustworthy website, the interest rate would take on heightened importance. Perceived differentiation among mortgage providers would diminish because if the provider is on a Google website “they must be reputable.” Such a trend would make life unpleasant for higher-cost producers and those without a strong non-rate-related value proposition.
Major Bank Adoption
With Google in the game, online mortgage rate comparison would become more mainstream. That might be enough to finally convince major banks that they need to play in this space. It worked in the U.K., where Britain’s top 4 banks are all now on Google Compare.
Rate comparison sites in Canada (one of which this author owns) can’t compare to Google’s brand power. When consumers learn about Google’s “new way” to search for mortgage rates, they’ll give it a shot—Gen Y’s especially. In fact, 40% of consumers aged 18 to 34 say they’d considered banking with Google. And many more would try its rate-comparison technology.
More Broker Channel Lenders
Without a doubt, new direct-to-consumer lending models would pop up. But a more competitive market might also bring more lenders into the broker channel. Their goal being to boost their distribution reach and stem market share declines. That’s what happened in the U.K., with holdouts and banking heavyweights HSBC and TSB recently joining the broker channel, among others.
Some might dismiss these scenarios as pure speculation. But underestimating Google is like underestimating a grizzly’s spring appetite. We don’t know if Google will enter our mortgage market, but all of us in the business would do well to assume they will. Preparing for this type of future threat could make any mortgage originator’s business stronger today.