Filling gaps 'logical place' for non-banks

by Adam Smith07 Dec 2011

Funding pressures mean non-banks won't be able to compete on price in 2012, but Firstfolio's Mark Flack has said this is nothing new for the industry.

Flack has told Australian BrokerNews funding pressures are set to grow in the year ahead, making it even more difficult for non-banks to compete with the majors. Competition will happen around service and credit policies rather than price, but Flack argued this is nothing new for non-banks.

"The non-banks in today's market are always going to be at a price disadvantage. They need to find a segment where they can offer a service and credit proposition rather than a price proposition. This is the way it's always been," he said.

Flack pointed to Firstfolio's recent acquisition of non-bank Calibre Financial, and said its funding platform would allow the company to expand into niche product markets.

"We're looking at targeting niches such as self-managed super funds and some other loans for property investors that are structured a bit differently. We don't need huge volumes. We just need a small share, and that's profitable for us. We didn't buy into the Calibre platform only for its capacity on residential mortgages. It's to fill gaps and to allow us to expand into other asset classes on our own terms," he said.

Firstfolio will initially look to expand into these products through its direct channels, but Flack said it would bring new offerings to its third-party network once it had refined service and pricing.

Flack said non-banks could not spend 2012 engaging in discounting wars with major lenders, but would best serve brokers by offering a solution for complex deals or niche product demand.

"That's the logical place for us to play in the broker space," Flack said.