The brand builders

by AB16 Jul 2018

Enjoying a record year to date, Mario Rehayem, Pepper Money’s Australia CEO, explains how and why the lender has rolled out the definitive guide to broker branding

From the outside looking in, self-employment is a whirlwind of homeworking, flexible hours and long lunches. However, for those who establish their own enterprise, the reality is very different.

The number of self-employed Australians has declined almost 2% since 2010 to 16.5% of the total workforce, and in broking 50% of new-to-industry brokers close shop within the first 18 months. It’s fair to say that self-employment brings as many obstacles as it does opportunities.

While practical business advice can be difficult to source, one lender has placed a renewed focus on supporting brokers with what is arguably one of the most challenging elements of business operations: marketing.

Last month, Pepper Money debuted an alternative lending toolkit at its annual Insights Roadshow, which visited Melbourne, Adelaide, Perth, Sydney and Brisbane. Described by CEO for Australia Mario Rehayem as a natural extension of the alternative lender’s Brand Hand, introduced in 2013, it’s the latest third party channel investment from Pepper Money, devised in response to broker demand and market trends.

“Since we started the Pepper Money Roadshow the one consistent message that has come from brokers is that they love dealing with us but don’t know how to market to alternative lending customers,” Rehayem says.

“Then another theme was that they like our marketing, messaging and branding but need support with marketing their own business, within and beyond the alternative lending space.”

In response, Pepper Money pulled together the expertise of its marketing, analytics and sales teams to create the ultimate guide to broker branding. Described by Rehayem as a “meaningful investment”, the toolkit has been designed in response to more than six years of data collected from Pepper Money’s own surveys, reports and analysis, repackaged for the brokers who drive 95% of all the lender’s business.

The kit contains three tools: referral partner collateral, a customer satisfaction survey template, and alternative lending content to help brokers create their own website landing pages.

“This is just a natural extension and the result of constantly listening and giving back to the broker market by leveraging our internal expertise, our business, as well as what we have learned over the years,” Rehayem says.

“These tools allow brokers to come up to speed quicker and get insights from the learnings we have applied to our own business in both the direct-to-consumer channel and broker channel. So it’s a bit of both.”

Behind the name

While there is no single formula for creating a successful brand, the first rule of marketing it is to associate your brand’s name with its values and then consistently push those elements across all activity. However, that can be difficult to achieve unless the products and services on offer align with the name over the door.

Pepper Money’s white label loans are identical to its branded products, and because lending authority and underwriting functions are retained in-house, standards, compliance and customer satisfaction are safeguarded while the broker’s brand is supported to grow.

“The white label space is constantly changing,” says Rehayem. “It has moved from the old days where lenders had their own credit, customer service and sales team to having hybrid models where the partner takes responsibility for those functions.

“This is just a natural extension and the result of constantly listening and giving back to the broker market” Mario Rehayem, Australia CEO, Pepper Money

“Then there is the new version of white label, the fintech-style brokers and networks that are 100% online, direct to consumer. It’s an old system and an old offering that is evolving as everything else evolves. You have people spending millions of dollars on their own brand, and they want to extend it. We cater to their needs as well.”

Helping brokers to select the right product for a customer, the Pepper Product Selector (PPS) tool was developed in-house to give brokers the confidence and information required to offer a wider range of products. PPS uses the responses to a 12-point questionnaire to return information on rate, fees and other terms and conditions within two minutes, 24/7. To date, 3,000 brokers have used PPS, and around half of those return to use it on a regular basis.

Rehayem says PPS represents “a good chunk” of business coming in, with more than $4bn in indicative offers to date.

“We had the idea internally and then acted to remove that barrier to entry, so brokers don’t need to know the product guide, just their own customer,” Rehayem says. “We are now able to help more customers, not because we have changed our product but we have changed the ability for someone to have the confidence to offer the product.”

Enduring change

The last 12 months have seen significant changes behind the scenes at Pepper Money, with KKR purchasing a 53% share last August and the group delisting from the ASX. Describing the deal as a “two-way relationship”, Rehayem says it paves the way for KKR to further extend its own global footprint by combining Pepper Money’s management and market experience with its own capital.

A year after expanding into personal loans, Pepper Money’s commercial loans launch this month, tailored to both prime and near-prime customers. Describing this as a “golden opportunity”, Rehayem expects to build a “fairly sizeable market share” by 2020.

Such developments support Pepper Money’s goal to service the financial needs of the millions of Australians it says are locked out of the financial system. According to the lender’s own research, 18% of Australians have been turned down for a loan and 42% do not feel their financial institution understands their goals.

Alarmingly, a huge share of these would-be borrowers are the gig economy entrepreneurs, start-ups and small business owners the modern workforce is built on, while others have experienced life events that have periodically affected their earning potential.

As regulatory changes start to redefine the role of the lender, the availability of credit and the very concept of responsible lending, Rehayem says lenders will increasingly have to “get under the bonnet” when identifying if an applicant will be a ‘good’ borrower.

Naming it as one of the key trends that will define the broker space to the end of this year, he explains, “There will be a lot of confusion, and I believe brokers should explain what is going on in the industry to their customers.

“I believe they need to prep themselves to be better brokers, and by that I mean it’s all about the communication they have with their customers.”

Looking ahead, Rehayem predicts that home values, compliance and CCR will have the greatest influence on the broker space, and that to thrive despite the storm brokers will need to continue to focus on the integrity of their own businesses and brands. At Pepper, the investment and support will carry on as the lender expands its reach in the market and continues to assist both borrowers and brokers in achieving their goals.

“We are proud of the investment we have made in the broker channel because we can see the return coming back: brokers gravitate towards our brand; they know we are there to support them,” Rehayem says.

“We don’t have mixed emotions on whether we want to be direct or not. We are 100% broker focused, and that is something that will stay true.”