The transfer of property is a complex process that is vulnerable to administrative errors, delays and potential fraudulent financial activity. Conveyancing attorneys are under immense pressure to ensure properties are transferred with the minimum delay as efficiently as possible, while keeping all the parties in the process informed and happy.
Willie Stoman, CEO of PEXSA (The Property Exchange of South Africa), discusses how new digital payment technologies can assist conveyancers to effect a seamless and secure payment system, speed up transactions, reduce admin errors and, most importantly, combat fraud.The Attorneys Fidelity Fund has paid out more than R745 million over eight years to South Africans who have been defrauded during property transactions.
With an outdated Deeds Office system and cumbersome payments and settlements process, the current processes are open for errors and potential fraudulent activity – there is a need for a modernised property transfer process.
Willie Stoman, CEO of PEXSA (The Property Exchange of South Africa), discusses the landscape and how to address the issues through new digital payment technologies that can assist conveyancers to effect a seamless and secure payment system, speed up transactions, reduce admin errors and, most importantly, reduce fraud.
Q: Last year, 285 000 properties were sold in South Africa. In the current property payment landscape, what are the risks for property buyers and sellers?
A: In my opinion one of the biggest risks in the current system is the time delay between the registration of the property and the time the seller receives their funds. During this window, the Seller does not own the property anymore and has not received his money. Why must a consumer wait for their money when their property was sold and registered in the deeds office? It is unlikely you would sell your car and wait for the buyer to pay you. Payment systems are continuously modernised for all different payment channels, however, property payments lag and consumers demand a faster and more secure payment system. Australia took the lead and many European countries are also moving towards a new streamlined and more secure payment system for property transactions.
For most people, a property purchase is one of their biggest purchases in their lifetime and consumers are demanding more transparency, continuous updates during the conveyancing process and most importantly the immediate availability of funds when the property registers in the Deeds Office.
Financial institutions that have their clients’ interest at heart, that are serious in building customer relationships and protecting their customers against potential errors and fraud, support PEXSA in its drive to change this current risky and inefficient process.
A further risk nowadays is when buyers deposit funds into Trust accounts. Consumers should insist on more transparency when their funds are deposited into a Trust Account. Their deposits must be invested in their name and they should know where the money is invested, for what period, at what interest rate and insist on an IT3B that will reflect the interest received for the period the money was invested.
It is our aim at PEXSA to drive the process and deliver a platform where funds become available for immediate distribution at date of registration as the proceeds might be needed for a further property purchase or to deliver on a pre-agreed commitment. A fast, secure and guaranteed transfer will not only boost consumer confidence, but will also increase the velocity of money.
Q: Despite being one of the biggest asset classes in the South African economy, the property transfer system is an outdated and cumbersome, paper-driven process. How will PEXSA contribute to the modernisation of the system?
A: In an era of internet connected businesses and online banking, there is a need for property transactions to be digitised to streamline the process and ensure greater efficiency and transparency of the financial transactions. The modernisation of the payment system will bring registration and the flow of money closer to each other. The aim is for the system to achieve the transfer of money and the registration of the property simultaneously.
The PEXSA system verifies and registers valid conveyancers resulting in a Closed User Group of verified Conveyancers. Thereafter conveyancers have the ability to load beneficiary account details in the system, verify these accounts, after which, these accounts are locked. Any tampering or changes to these accounts will follow a new verification process and will initiate an alert by sms and email to the beneficiary.
During phase one, the payment and settlement happens through the interbank systems with a single capture screen in PEXSA from where a conveyancer can initiate all payments. The one bank will pay the other bank and the proceeds will be transferred to the conveyancer’s trust account on date of registration. The conveyancer can offer the customer the option to access the money immediately, the same day or when the normal banking transfer happens.
Q: There are a number of stakeholders in the property purchase process, are they committed to this solution?
A: Yes… we have tremendous support from regulators and all market participants.
Our financial institutions are at the forefront of combatting anti-money laundering activities, fraud and protecting consumers. Our banks are, in my opinion, the best and most advanced compared to many countries and they have shown the vision and leadership to embrace new technologies that can benefit all stakeholders, but most importantly the consumer.
Conveyancers are the gatekeepers of a property transfer and are there to ensure a safe and secure property transfer and are facing immense challenges to affect a secure and safe transfer of a property in the Deeds Office. Increased fraudulent email scams, identity fraud, human error due to pressure and increased consumer demand, make us believe that conveyancing attorneys need all the help and assistance possible to safeguard their clients against all these risks. PEXSA is there to assist conveyancing attorneys to achieve this level of excellence and conveyancers are extremely supportive as PEXSA will help them to mitigate risks and improve efficiencies during the process.
Estate Agents support PEXSA as it means that they will receive their commissions faster.
Q: Is the Deeds Office digitised and updated enough to be able to be part of this new system?
A: The Deeds Office is planning a new Electronic Deeds Registry and PEXSA is designed for seamless integration with any Electronic Deeds Registration System.
Q: How are property buyers and sellers protected from human error, potential fraud and scams?
A: When signing an Offer to Purchase it is required from a buyer and seller to provide their banking information during their FICA declaration. They will be notified when their details are successfully and correctly captured in the PEXSA system. The beneficiary account numbers are locked and the beneficiary will receive an alert if any changes to their bank account details are made.
Upon the successful property registration, the payment of proceeds is the most important and risky part and if compromised can be detrimental to all stakeholders. The PEXSA system improves accountability, reduces errors and mitigates financial risk for the consumer and other involved parties throughout the payment process, through a process of segregation of duties in the conveyancing firm and through many automated checks and balances.
Q: In the securities sector, transfer of shares and monies is simultaneous. Does this take place in the property purchase environment?
A: The securities markets developed the concept of “delivery vs payment” where the one (delivery) could only happen if the other (payment) also happened. This is also a characteristic of the next phase of the PEXSA property payment system. The system ensures an efficient, simultaneous, final and irrevocable transfer of ownership in exchange for payment in one click online, which is in the interests of the buyer, seller, agent, banks and conveyancers.
Q: How can property buyers and sellers protect themselves?
A: We encourage buyers and sellers to ensure that they sell their property with conveyancing attorneys who are ‘PEXSA’d’ – this way they will know that the payment and settlement process will be streamlined and above board.
For more information, visit the PEXSA website.
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