​Big four 'absolutely' concerned about second-tier: Woolnough

by 22 Jan 2014
ING Direct is set to tackle the big four’s market dominance in 2014, and head of broker distribution Mark Woolnough says the majors are taking notice.

“I think they are absolutely [concerned],” said Woolnough. “The big four have played a great role in the banking system, especially coming through the GFC, but in doing so it really did highlight once again the highly concentrated nature of the banking system and therefore the lack of competition.”

With the ‘Son of Wallis’ root and branch inquiry into the financial system set to look at competition in the banking sector, economists have been calling on the inquiry board to tackle the issue of Australia’s ‘too big to fail’ major banks.

The latest statistics show the big four have been slowly losing market share in recent months, especially with regard to fixed-rate loans.

Non-major banks more than tripled their market share of new fixed-rate loans in the final quarter of 2013, with ING Direct seeing the largest increase of 5.7 percentage points.

“If you look at the last six months it’s been a perfect mix for the broker community and for the Australian consumer,” said Woolnough.

“The continued low cash rate and an environment of flat credit growth and rising property prices combined with strong consumer sentiment has resulted in a lot of activity, and that activity has been transferred into greater competition and great choices for brokers and for consumers, especially in the second-tier market.”

Brokers see second-tier lenders as more nimble, more flexible and able to operate with greater speed, says Woolnough.

“And with 75% of our home loans written though the broker community it’s absolutely imperative that we continue to evolve and develop our business to align with the demand that’s been driven through consumers and brokers to make sure we meet those expectations.

“I think the last two years is proof that we are prepared to listen and invest in delivering enhancements and improvements to that value proposition.”

Feedback from brokers has indicated a need for a more efficient and ergonomic website portal to help time-poor brokers increase their productivity.

ING Direct will also continue to focus on distributing non-mortgage products through the broker channel, which Woolnough says helps both the bank and the broker with client retention.

“Brokers who are interested in the full client relationship appreciate the opportunity to talk beyond just the mortgage product and they see the role they play in educating Australians around the numerous components of financial literacy.”

ING also has further plans to bolster its sales and service model and be more visible in the broker market, including a potential broker and adviser call centre.

More and more lenders are starting to recognise the efficiency and quality brokers bring to the transaction, says Woolnough, and he expects to see more lenders start to reward brokers for this.

“Today remuneration models are still very much focussed on the transaction, but I think the business models and the aggregators, broker groups and lenders are starting to take a more long-term view of business and reward true value.

“I think there’ll come a point where the bigger broker models and aggregators will be forced to make some investments into ensuring they continue to grow organically within the business they’ve worked so hard to acquire over the years.”

COMMENTS

  • by Country Broker 22/01/2014 9:03:48 AM

    If the regional banks really want to take on the big four they need to look at their post code restrictions ( there is a large and growing market outside the major Metro regions) and also the cost of their LMI premiums compared to the big four , I cannot understand why the difference in premiums .

  • by mac 22/01/2014 9:59:30 AM

    And general credit policy flexibility. Quality borrowers with one little quirk in their deals are not going to ING or the other 2nd tier lenders at present as the credit policies are set in stone. It could be a new employment contract just signed with a new employer after being F/T many years same industry or security property just outside policy etc etc. They need to be able to say we are big and bad enough to take on the majors ON POLICY as well as price and product.

  • by Old Joe 23/01/2014 10:44:54 AM

    LMI premiums are too high for non banks and also smaller players. FHB will not cop 30% higher LMI premiums for a supposedly good rate.. numbers don't add up for the first 2 years try it on your simulators.