A hybrid model combining the online direct channel and broker expertise has been named as a potential answer for brokers struggling to maintain relevance in an increasingly digital marketplace.
Aussie Home Loans chief financial officer John McDonald has revealed the company is currently examining the viability of direct online channels, saying it may experiment with a hybrid model which combines online origination and broker guidance. This follows Aussie founder John Symond’s guidance the business would use direct to cross-sell products.
“We’re currently trying to think about how the direct model works. Frankly, I think one of the big opportunities for the broking sector is that mix of what we might traditionally have thought of as direct combined with a broker support element,” McDonald said.
Speaking at a recent LIXI conference in Sydney, McDonald admitted online proprietary lending had proven challenging for lenders in the past, and many lenders had “burned a lot of money” on these ventures. However, McDonald predicted that a “new appetite” for online channels would emerge. He said Aussie was looking to gauge the impact of this development on its brokers, and would look for ways to help brokers capitalise on the growth of online lending.
“We will test a direct model, but we will also in time test a mixed model where you allow the consumer to drive efficiency for brokers by providing all the details they possibly can over an internet-based submission engine. Then you can potentially leave it to the customer to drive how much handholding they need,” he said.
This would largely be dependent on the age of the borrower, with McDonald suggesting younger generations are becoming increasingly comfortable with transacting online.
“There’s a hell of a lot within the broker’s world that is able to be automated. The data collection in a mortgage origination process is a very painful and labour intensive component of that process. While 50-year-olds probably aren’t inclined to go through that process themselves online, 20-year-olds certainly are. The willingness of 20-year-olds to share information over the net or to submit information over the net is much greater than that of the older generations,” he said.
However, increased automation will not serve as a substitute for the expertise brokers offer to customers. McDonald said this expertise would remain part of the broker value proposition.
“There is an overlay of absolute value being driven by brokers. I don’t think for a minute that a consumer can know that the processing time in bank one can be two weeks longer than in bank two, or that bank three is really concerned about the Northern Beaches as an area, so their lending criteria is much tougher than bank four. There are a whole series of overlays that create value from broker knowledge,” he said.
McDonald has conceded that a broker hybrid model was, at this stage, “an experiment”. He said the company had yet to sufficiently explore the model to gain any feel for the potential uptake. Ultimately, McDonald forecast that Aussie would make several channels available for consumer engagement, and let borrowers drive the uptake.
“We’re not phased by how quickly that occurs, or the extent of handholding they need. We’re fairly happy to put all the channels out there for distribution and leave it to the consumer to drive the usage,” he said.
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