Empowerment through compliance

by Melanie Mingas12 Apr 2019

NextGen.Net director of sales Tony Carn tells Australian Broker how the firm’s new suite of tools will enhance compliance, improve lending standards and empower brokers

As far as million-dollar questions go, the broker channel has been forced to address a few over recent months.

From questions about living expenses to those around responsible lending and best interest, some have been easier to answer than others.

One that has proven to be particularly tricky is how to standardise and regulate the brokerclient relationship, particularly when it comes to proving best interest.

Until recently the approach demanded manual data input and close liaison with multiple parties, repeating tasks and driving down efficiency. But all that changed in 2017 when NextGen.

Net embarked on the phased introduction of the Compliance tab within ApplyOnline.

The upgrade was rolled out with a simple premise: to reduce the risk of data input errors and maximise efficiency by eliminating the need to re-enter information.

“There has always been a requirement for lenders to ensure that the needs of the customer are taken into consideration, and what we have now is a much more formalised process, and we have put a robust structure around that,” says NextGen.Net director of sales Tony Carn.

“It’s really about going beyond the unsuitability test of saying that this loan doesn’t appear unsuitable; it’s more around identifying what is in the customer’s best interests. That’s a very important aspect of the tool.”

Inspired by requirements identified by the Combined Industry Forum, the tab emerged from a working group established by the major banks and NextGen.Net.

The group was tasked with exploring the best way to deliver a new set of standards around the client interview process, and the results are also closely aligned with APRA’s reviews around best practice – something that in itself has become a point of debate since 4 February.

For brokers, additional responsibilities on the compliance front are part and parcel of the job. However, this time the mechanism to achieve that compliance is technologically sophisticated enough to eliminate the associated workload burdens.

“I think there is a real elephant in the room in the industry at the moment around managing the customer’s best interest” Tony Carn, director of sales, NextGen.Net

“Driving a standardised solution is always a big thing for us at NextGen.Net.

Standards make it easier to do things; they make things cost-effective, and the integration point of difference is easier to manage, but collaboration with the community is really important,” says Carn. Westpac, St. George, Bank of Melbourne and Bank SA were the first to implement the Compliance tab in November 2017, and the rest of the majors followed suit in 2018.

Since then a cohort of other lenders have also adopted the tab, including ING, HSBC, Bankwest, AMP, CUA and three Teachers Mutual Ltd brands, among others.

For any broker who has recently written a loan with one of these banks, the tab is nothing new. What is new is that in a post royal commission finance industry the idea of compliance takes on a whole other meaning – one that begs further questions around suitability, retention and, ultimately, how the broker channel can be empowered to fulfil its role.

“I think there is a real elephant in the room in the industry at the moment around managing the customer’s best interest not just for new loans but for the significant change events that happen throughout the life of the loan,” says Carn.

As Carn observes, transactions are managed from the point of onboarding a new customer, but there are limited processes to empower the management of any variations that customer will require; for example, switching from P&I to interest only, or moving to a fixed rate.

“I expect broker management of customer transactions on an ongoing basis to be front and centre of everyone’s mind, and I think it not only addresses compliance but also addresses retention risk for lenders going forward, and it requires lenders to actually empower brokers,” Carn says.

Work in progress

The Compliance tab isn’t the first ApplyOnline upgrade, and it’s far from the last. Currently, ApplyOnline provides electronic lodgement solutions for 97% of Australian mortgage brokers and more than 50 lenders, facilitating in excess of 650,000 loan applications per year.

In 2017, NextGen.Net’s ongoing digitisation of lending reached commercial loans, with early adopters including Suncorp, NAB and Pepper Money.

Then, in 2018, eSign debuted as part of the ApplyOnline Supporting Documents service, and the ApplyOnline Serviceability Calculator underwent enhancements to streamline information flows and create labour-saving efficiencies.

“We are doing a lot of great things, whether it’s new products, the integration of ordering valuations and other services, the implementation of basic features or enhanced variations.

That is what empowers brokers, and lenders have frameworks to maintain their customer base,’’ says Carn.

‘‘Driving efficiencies drives cost reductions and also helps ensure compliance – they are all big ticks for all players in the market going forward.

For lenders, the next frontier is benchmarking. By analysing ApplyOnline’s previously gathered transactional data in new ways, NextGen.Net will be able to provide lenders with the data required to compare their performance with that of their competitors, across such metrics as borrower profiles, loan types, approval times and rework. Carn says, “We are doing some really cool stuff at the moment using data, and we are at the very early stages of looking at things such as where does a lender’s credit policy sit compared to the market? What does their inflow of lending look like as a segment of the industry?” The idea is that every lender will be able to identify their best and target their weakest performance areas, driving higher standards across all elements of lending for all involved.

“The really big one is for a lender to know their ‘time to approval’ and their ‘time to yes’.

It might happen within so many business hours, but when compared to the market it’s actually terrible. So it’s about how do you actually get deeper integration to create that better, seamless communication with the customer,” Carn says.

“The better we make the lender processes the better the touchpoint is for the broker, and the customer too is having a better experience.”

From the broker and borrower perspective, the data quantifies the point of difference offered by each different lender throughout the application process.

It also supports the attainment of Straight Through Processing (STP), the idea of automating and streamlining manual processes in the finance industry to enhance efficiency. For Carn, STP is identified at the point of sale (POS) – not, as commonly believed, through a platform – meaning that the broker can accurately obtain real-time conditional approval on an application.

“The broker and customer experience is dramatically improved if a complete and verified package of data and documents is provided from POS.

This leads to a high level of confidence for all parties that the deal will be approved,” Carn explains. Benchmarking aside, Carn says a “significant workload” lies ahead for NextGen.Net, which will focus on user experience and interaction, hand in hand with ongoing work around digitising commercial loan lodgements and growth within NextGen.Net itself.

However, enhancing compliance and driving efficiencies remain top of the agenda. “It all comes back to compliance – there is a lot of work to do, but it will future-proof the industry. Using technology to implement better compliance, particularly from a lender perspective, should be a no-brainer,” Carn says.

“The question for lenders now is how do I empower a broker to manage a customer on an ongoing basis? That has been quite a topical question for all the wrong reasons lately.

I think there is an enormous opportunity, and quite frankly if it had been addressed earlier it would have prevented quite a few headaches.”