The second quarter of set a record for fintech fundraising, according to CB Insights data. With companies raising rounds of $ million or more in Q, fintechs had just reported a record-setting mega-round with companies raising more than $ million in the first quarter.

Many fintech companies that serve consumers directly — often called “consumer-direct fintechs” or “neobanks” — are now eyeing giant opportunities in mortgage and housing. The U.S. mortgage industry, for example, is expected to fund $. trillion in new volume and . million new first-lien mortgage loans in alone, per the Mortgage Bankers Association.

At first glance, consumer-direct fintechs might appear to pose a mounting threat to traditional mortgage lenders. After all, they gained a lot of ground in recent years, with a global market size valued at $ billion in — one that’s expected to expand at a compound annual growth rate CAGR of .% from to .

The advance of fintech entrants, though, has set up two diverging groups of mortgage lenders: those who use business-to-business fintech to stay ahead and those who will ultimately succumb to disruption as new competitors learn the mortgage business.

Despite their impressive footprint in banking and deposits, and even in lending, fintech’s arrival in the mortgage and housing markets doesn’t come close to foreshadowing the demise of incumbent mortgage lenders, especially those lenders that have the technology to stay ahead.

Just gaining a foothold will be much harder for fintechs than it might at first appear. The top U.S. mortgage lenders capture nearly % of the market share. Even though some challenger fintechs have the banking-on-your-phone experience down cold, those that do are still learning mortgage. It will take them years to develop the subject matter expertise needed to compete with the traditional lenders that know the nuances of the intricate mortgage market.

Once they’ve obtained that needed expertise, they still will have only reached parity with incumbents. Eight of the top lenders are powered by BB fintech players across their tech stack; these lenders are investing to become adept at customer experience across all channels. The rest of the mortgage industry, even down to small-to-medium-size lenders, is following suit.

In short, while consumer-direct fintechs are developing their industry acumen, other fintechs are helping incumbents to shore up their technology weaknesses.

Mortgage has seemed like an opportunity-ripe industry to challenger fintechs and their investors. The easy money, though, has largely been made. With a massive wave of borrowers refinancing in and to a lower rate, refinances now represent about % of mortgage debt outstanding. With rates expected to rise in the year ahead, total mortgage origination volume is forecast to drop % to $. trillion in .

Fintech competitors will not be able to count on future business just walking through the door. Even with the healthy refinance opportunities that remain, new competitors must garner significant origination to become true “disruptors.”

Consider how far disruptors will have to go to represent even a small portion of the market’s originations. Opendoor, for example, attached just mortgages to its real estate deals in May after entering the mortgage market — that compares to the . million estimated home loans originated in . A much higher performing lender, such as the rank mortgage firm, captured just .% market share; the firm ranked th claimed just .%.

Referral relationships are the foundation for loan officer originations, especially in a market where most mortgages are for home purchases. Mortgage markets — especially residential real estate — are highly influenced and driven by specialized human advisors and referral networks.

Newly funded real estate lenders that focus on mortgage, or that make it a part of their quest for profitability, will face the long, hard work of building a team with connections that generate originations.

Mortgage and housing regulations rank among the strictest in all of consumer finance. Referrals from Realtors and builders are subject to a countless number of strict federal rules. Owning a purchase market requires relationships and the capacity to manage the risk of those relationships. Both are new muscles for the technology industry, which has preferred historically to circumvent rather than face regulated activity.

The mortgage sector’s extreme complexity, regulatory burden and the acumen of incumbents simply make it too difficult for new entrants — even wildly successful ones — to catch up to the far-reaching head start enjoyed by traditional lenders.

It’s for these reasons that I predict consumer-direct fintechs won’t create sustainable scale with borrowers in or the near future. However, leaders at mortgage companies need to ask why fintechs are a threat at all. It’s the customer that makes fintechs a threat. Lenders need to focus now on what their borrowers want from them, rather than waiting for competitors to force progress on them.

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