NextGen.Net sales director Tony Carn explains how A made in Australia approach to digital lending is paving the way for brokers to diversify their businesses
In terms of innovation there are a few things 2004 is remembered for, from the launch of Facebook to the debut of Foxtel Digital. It was also the year of the first digital residential mortgage as CBA, Westpac, Macquarie and ANZ, along with aggregators Aussie, AFG and Mortgage Choice, started the shift to electronic lodgement.
Powered by the introduction of ApplyOnline by NextGen.Net, the move paved the way for seismic shifts in capability and demand on the part of both the lender and the borrower.
“Fifteen years ago, there were a lot of challenges regarding efficiency and customer experience, mainly around digitising applications. The key objective of electronic lodgement was to ensure the quality of applications and also to standardise back channelling,” recalls NextGen.Net sales director Tony Carn.
Two years after the launch of ApplyOnline for residential loans, usage rates lingered in the region of 40%. Then, accelerated buy-in across the industry saw adoption reach a level of critical mass and the financial system changed dramatically. Today, ApplyOnline provides electronic lodgement solutions to 97% of Australian mortgage brokers and more than 60 Australian lenders, facilitating approximately 60% of all loan applications lodged annually.
“It’s human nature that in many ways people can be impervious to change. When the first lender said they would only accept electronic applications things really gained pace, and within a year take-up was 95%, then a year later 99.9%,” says Carn.
“Buy-in is important and there was a lot of leadership involved at the time from various institutions, as well as a lot of collaboration and anticipation.”
The innovations continue. In 2017, NextGen.Net’s ongoing digitisation of the lending landscape reached commercial loans, with early adopters including Suncorp, NAB and Pepper Money. Supporting diversification at a broker and lender level, Carn predicts electronic lodgement for commercial loan applications will become an industry norm over the next 12 to 18 months.
In February, eSign debuted as part of the ApplyOnline Supporting Documents service. Described as a milestone in the evolution of the loan application, it eliminates duplication and error as well as saving time. Last month, NextGen.Net’s Serviceability Calculator, a new capability within ApplyOnline, underwent enhancements designed to streamline information flows and create labour-saving efficiencies.
The innovations are not just about the experience of lenders and customers but of the brokers who assist them. As the process is simplified, so too is the broker’s ability to bring a wider range of solutions to clients. For example, ApplyOnline was originally intended to enhance the quality and speed of home loan applications by preventing revisions and delays. Continued development has meant that today brokers can lodge both small business and residential loans online together, making the process simpler, faster and more consistent for all concerned. As Carn explains, it’s about innovations in the process, rather than efficiency itself.
“If you’re speeding up the process and ensuring quality, ultimately you’re giving a better broker experience, a superior customer experience, and, more importantly, you’re reducing costs. We’ve seen thousands of dollars cut out of the cost of processing a loan application over the last decade – literally thousands of dollars per loan,” says Carn.
Foundations for change
The modern world is built on hidden tech. From RFID radar tolls to Internet of Things connectivity and electromagnetic fields in mobile phone screens, these advances work collaboratively with other tech to meet the ongoing evolution of customer demand: efficient, hand-held and as close to instant as possible.
These demands have converged to change everything from grocery shopping to real-time financial management. A survey conducted by Oracle concludes that 69% of 5,200 respondents across 13 countries prefer their entire financial life cycle to be on digital channels, while 81% already use digital channels to engage with their banks. Further, research from KPMG indicates that digital channels are the preferred choice for 87% of people researching and servicing a home loan.
“A key part of our philosophy is: ‘Don’t get distracted by dogs with fluffy tails – or random ideas’”
To remain ahead of the curve, around 20% of NextGen.Net’s annual revenues are ploughed back into research and development, with 10% of the workforce invested specifically in R&D. Outside the labs NextGen.Net has taken a leadership position in the industry to drive collaboration, compliance and, crucially, security.
On the formula for success, Carn says, “R&D is critical. We always remember that it’s one thing to innovate; however, if there is no need for that innovation, what’s the point? You have to have a strong road map around what you are developing. Then you have to ask, does it meet a high priority need in the industry and how do we then move forward with that?”
The R&D team is located in Newcastle, with all development, personnel, data hosting and maintenance also retained on shore in Australia. It’s a strategy that’s designed to boost customer confidence, specifically around data security, as more functionalities are integrated throughout the banking ecosystem.
“Our focus is here, in Australia, and doing what we do well. A key part of our philosophy is: ‘Don’t get distracted by dogs with fluffy tails – or random ideas’. If they’re not on your road map, they have to be pretty good to take precedence,” he says.
In Carn’s own words, NextGen.Net operates a “mature SaaS model”, enabling banks to provide fintech-style solutions, fully integrated with established banking models and delivered under brands that customers recognise.
“The core component of a mature model is understanding the complexity of how products work in an integrated manner. There are a lot of fintechs out there with good ideas, but what you have to do is create something that integrates with other things. It’s important to have the connectivity with third party platforms,” Carn explains.
The digital broker
While the industry’s digitisation has come a long way, there is further to go, and although NextGen.Net’s teams are hard at work on the software that will drive it, Carn remains tight-lipped about the nature of that work.
What he does disclose is that brokers can expect further empowerment to broaden their portfolios through the continued integration of processes and auxiliary services across all lending. Functionality across these new tools will encompass secure data sharing to support the identification of relevant products, as well as streamlining applications to ensure the highest level of compliance with whatever reforms emerge over the coming months and years.
“Lenders can see now that digitisation of other product types is what brokers want and need in order to offer holistic solutions and really look at a borrower’s full financial picture. This ties into customer outcomes, and regulation is very important. APRA’s review of the banks made them recognise the need to change processes to ensure greater responsibility around lending, for them and brokers,” Carn says.
The road ahead may be long, but Carn has a firm focus on where NextGen.Net – and the wider industry – is destined to go. Brokers will have a leading role to play as technology is used to build confidence around diversification, to adopt better processes and standardise outcomes.
As Carn concludes, “Driving standards is important, and it’s necessary, around regulation, new product types and the way we calculate serviceability. Brokers are now part of a holistic approach where technology enables the end position of a better consumer outcome.”