When (if) Google Comes to Town

Google-CompareWhen 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.

Competitive

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.”

Commoditization

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.

Brand Awareness

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.

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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.

  1. Good thought provoking article. Similar example might also be Google Flights, which now dominates my searches, and I no longer bother with Expeida, Kayak… (yikes, already forgot the names :/

  2. I’m sure they are working on this already – we are just not high on the list.
    Competition in “the perfect client” space is already overcrowded in Canada, so this may not impact brokers as much, unless that’s their primary business.
    Ratehub and your site, Ratespy, will definitely take a hit when Google comes to town. Maybe they will just buy you out.

  3. thanks rob
    Sometime too much is simply tooooo much… I googled your google site, and after 10 minutes, I was still able to go past 100 PAGES of entries of lender rates for the fixed 2 year term, with, I guess, a teaser rate up front. And the rates on page 100 were similar to rates on page 1, so the difficulty to choose one lender from the 500 or more offered seemed a little (being polite) overwhelming. Having said that, In Canada we dont have to get to 100 pages to see all the lenders available, but still overload on any one element might add confusion rather than clarity…. but them maybe i didnt know how to use the site properly

    1. Hi Bruce, On a related note, I heard about a broker last week who was marketing himself as a “rate site advisor.” His purported specialty is helping clients interpret and compare rate site options. For virtually every problem there is a solution. This guy has used confusion about the sea of rates to create a new niche for himself.

      That said, technology can always be improved to help clients find more suitable products. Several folks in our business are working on just that, as we speak…

  4. And so the race to the bottom continues – this general process shouldn’t come as a surprise – where something can be commoditized (and is still profitable), it will be – as we have seen with the adoption & increase in popularity of cut-price rate shops.
    Where I feel the broker community will suffer is exactly as described here – those that don’t have a strong non-rate related value proposition, but again, this shouldn’t come as any surprise – live by the “rate” sword, die by “rate” sword.

    1. I have been listening to “die by the rate sword” for more than 3 years. What has happened in 3 years is that there is now triple the number of online discount mortgage brokers than 3 years ago. That sword better hurry up or you will need a regiment of swordsmen.

  5. While I would never underestimate Google, the rather early demise of Rogers-backed wannabe real estate giant Zoocasa should remind us that tech-savvy corporations with deep pockets may still find themselves out of their league, if they fundamentally don’t understand the business they’re in.

  6. Appraiser raises a great point about Zoocasa, you can have a great idea but when you deal with the public you are in the execution business. Even those of us who advertise discounted rates do it one deal at a time and you must execute on every facet of the deal, What is the right lead source? what is the spend? is your website good enough to attract an inquiry? how are the inquiries being contacted? how carefully are those leads followed up on? how well trained are the people initially speaking to the client? how good is the electronic application you are sending to the client? how good I that application follow-up?

    Look at that long list and we still do not even have an application yet. Many moving part in this game. Just throwing money at something does not make it work.

    But the real truth is that discount online Real Estate Sales is coming. There will be more failures and eventual successes but online discounted Real Estate Sales will grow. On the mortgage side we have a far easier to commoditize product, Real Estate is pure service our business from the public point of view looks like a rate and contract provisions. There is a lot more to it than that but the public mainly sees just the surface.

    Google’s interest in this type of product offering is just another proof of the validity of the concept, this is not Google Glass. This is something Google intimately understands: online search.

  7. To Tom- “race to the bottom” ? I am assuming you are referring to service or quality levels, rather than just rates. Increased competition is often ugly, but in looking over the last 30 years ( or just make it the last 5 years if you like), the winner here has been the consumer. The mortgage providers (lenders and brokers) have been made to share more and more services for less returns. (Although with real estate values – and therefore mortgage needs – jumping 100% over a number of years, it has not all been downhill.) But there is still profits to be made. Some will say not enough and leave; some will adjust, and survive. Ultimately it is the consumer who will choose the platforms from the options that are made available.

    To Ron- re Real Estate discounting The industry is in a huge state of denial. The “hiddenness” – sorry for the word – of the amounts paid has allowed the industry to survive without massive change. A simple solution would be a change of how commissions are paid. The borrower would pay 50% of the commissions and be required to pay 50% of that up front when first meeting a buying realtor; the seller would pay the other 50%, but again would pay 50% of that fee up front at time of listing. Then, if an agent can convince me to give him/ her $20,000 up front to do promised services; things would quickly change and dramatically. Those great agents would survive with good incomes; the raft of incompetents would die off quickly. Dont hold your breath for internal change; but it will come in the “race to the bottom” as Tom puts it.

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