Q&A With M3 Group on its Acquisition of Pinch Financial
M3 Group announced last week that it had completed the acquisition of Fintech company Pinch Financial.
The Toronto-based company made waves in the mortgage space when it launched in 2017 for its platform’s ability to provide full mortgage qualifications in as little as 10 minutes. Its fully automated system has so far been offered as a white label solution for real estate brokerages, mortgage brokerages and major lenders.
The partnership with M3 Group gives the company direct access to its network of more than 8,300 mortgage brokers, who in turn will be able to access qualified homebuyers across the country.
We connected with Pinch Founder and CEO Andrew Wells and Dino Di Pancrazio, Chief Strategy Officer and Head of Mortgage Division at M3 Group, to learn more about the deal and what it means for brokers and mortgage shoppers going forward.
How long had M3 Group been looking to acquire Pinch Financial?
Dino: The conversations started more around business and partnering in terms of how some of our brokers are using the Pinch platform…So as we started talking about partnerships, as we got to know Andrew and his team better, we started taking a closer look at the technology and what they had built. That really was the beginning of our interest in seeing, could we do something more here?
Is this the ideal outcome for Pinch and what you had envisioned when you founded the company in 2017?
Andrew: Of course, when you start a technology start-up, you’re always looking for one of two end opportunities, whether that be something like an IPO or an acquisition. We’re incredibly excited about this acquisition, it’s probably exactly on, or maybe a little bit earlier than we had anticipated, but that’s because we’re pretty conservative in our assumptions.
It was something we weren’t necessarily seeking, but as we continued to have the discussion with M3 Group and talked further about how deep of a relationship we could have together, it just started to make more and more sense. We spent almost six months working through the process, having the discussions, meeting multiple times a week making sure there’s a cultural fit and everything like that. It’s a fantastic partnership, and we couldn’t be more thrilled to be joining the M3 Group.
What differentiates you from others in the market?
Andrew: At Pinch we focus heavily on the automation of the verification of the borrower’s information. Identity, income assets, liability source, down payment, creditworthiness and the property evaluation can all be verified at the time of application. By doing that, we’re able to calculate TDS/GDS, loan-to-value, FICO, net worth, any sort of consideration for both underwriting, as well as product and rate guidelines from a marketing perspective.
From M3’s perspective, what is it about Pinch that caught your attention and where do you see value-add to your current operations?
Dino: There are multiple layers to our interest in this. Definitely because of the sophistication of the tool, but it’s what the tool does right. At the end of the day, it’s what the tool does for the broker. One of our goals at M3 for the last several years has been how can we simplify and reduce the time that a broker spends processing a transaction? How do we automate the stuff that is non-value add. What Pinch brings to the table is exactly that, when Andrew talks about doing all this work upfront, what gets delivered back to the mortgage broker is a file that’s very complete, basically.
Andrew: The platform is the technology we built, but behind the technology is the model and the approach. We embed the product into ancillary channels, so real estate, brokerages, membership organizations, property developers, anything like that, and we create the net new origination for the broker opportunity. Basically the goal being, we go to the top of the funnel and we find the net new origination opportunity.
Dino: What Pinch does is gets us to the beginning of the customer journey. Whereas in the past, a homebuyer would start searching homes, and once they narrowed it down to one they would start looking for a mortgage. Well, this brings everything to the top of the funnel. We start that conversation with the customer early on, which again gets us to the zero moment of truth much, much closer than where we were before.
Could this model be seen in any way to be competing with brokers?
Andrew: I would never categorize it as being competitive to broker because we’re constantly providing net new deal flow to brokers of record for our referral relationships. A customer that was going to choose Tangerine, for example, was going to choose Tangerine anyways through its website or whatever the case may be. It’s not a matter of carving anything out that way, it’s just a matter of the customers that were going to end up in a direct sales bank were going to end up there regardless.
What is the plan for integrating Pinch and its team with M3 Group?
Andrew: We have a number of broker-driven lenders that we’re directly connected to already through Pinch’s APIs and now, thanks to this deal, we can also leverage the API connectivity of MortgageBOSS. It really opens up scale in terms of lenders and banks on our side, and also choice for the brokers in terms of who they’re able to work with thanks to the BOSS API.
Dino: Pinch will be managed by Andrew and his team, it is being managed separately. It will not be integrated as part of our technology team, it will continue to be managed as an independent business. That is important to us because we feel that is the best approach to let them run with the ball that they’re already running with, because their track record speaks for themselves.
Do you have any final thoughts on the deal and what lies ahead?
Andrew: I was reflecting on the weekend about the idea that we did this deal 100% over Zoom. So, it’s sort of a 2020 story, even though it closed in 2021. But we’re a team of immigrants, a team of people with different gender identities, sexual identities, we’re young, we’re aggressively sort of tech in that way. M3 gets who we are, and they’re not saying, ‘when you guys come, can you be like us?’ They’re saying, ‘we want you guys to come, but stay like you.’ That meant the world to us, and so we’re just incredibly excited about the opportunity.
Dino: I’ve been involved in a number of acquisitions in the past in this industry and out, the toughest thing is not the acquisition, the toughest thing is the integration and the integration relies on people. Now that the deal’s done, we look forward to the actual business implementation, the integration and everything that goes with that. Supporting the growth of this unbelievable business is extremely exciting to us going forward.