Is now the non-banks' time to shine?

APRA’s lending crackdown may have given the non-bank sector a leg up on interest rates, but what else can non-banks offer brokers and consumers?



There is no doubt that APRA’s lending crackdown has been a boon for the non-bank sector. Without having to limit investment loan growth or adopt new capital adequacy requirements, non-banks — which are not regulated by the banking regulator — have been able to compete against the sheer brand power of the major banks in a way they have never been able to before.     

Speaking to Australian Broker recently about the lending crackdown, Liberty Financial national sales manager John Mohnacheff said they were forced to adapt quickly to an “unprecedented influx” of new loan applications after lenders start tightening investor credit policies in June. However, Kim Cannon, the chief executive of non-bank lender Firstmac, says the non-bank sector isn’t just benefiting from an overall increase in new loan applications but an increase in better quality loans.

“On the broker side of things we are starting to see more and more good quality business come through,” Cannon told Australian Broker.

“In days gone by it was easy for the average broker to go out and write nine out of the 10 applications with one of the big bank brands while the other 37 lenders on the lending panel got the scraps.

“Now we are not fighting over scraps, we are actually seeing good quality borrowers making choices.”

More than just a good rate
Non-banks may be able to entice the broker and the customer with competitive rates in an increasingly complex market, but Cannon says both brokers and consumers are quickly realising that rates are not the only advantage of choosing a non-bank.

According to Cannon, non-banks are able to be nimble and adapt to technological changes to take away the pain points in the home loan process.

“There is a lot of technology change going on all around the place to make the process simple. At the end of the day, people rarely want to move banks or move lenders because it is all too hard,” he told Australian Broker.

“Why do you shop online? Because it is easy and the harder the experience the less likely we are to go back to the same place. That is where technology is taking us. If it is convenient to switch, people will do it.”

When it comes to Firstmac, Cannon touted electronic document delivery, a completely automated application process and a “customer self-help” portal where consumers will be able to send outstanding documents directly to Firstmac as its major technology focus. For brokers specifically, he said the success of their e-BDMs have seen major lenders follow suit.#pb#

“I thought it was the biggest waste of time for a salesman to sit in the car and drive around calling on brokers face-to-face. It is great to catch up with brokers on PD days but an e-BDM sits at his desk and is able to talk to brokers over the phone or over the internet all the time.

“A lot of the other lenders are now starting to focus on employing e-BDMs to do the same thing. You don’t need someone driving in a car to see three people a day when he can call 60.”

But on top of technology — and potentially even more important than technology — Cannon says the simplicity of the actual product offering is what sets non-banks apart from banks.

“All we ever hear about banks talk about is this notion of ‘share of wallet’ and they are spending millions of dollars on systems to attract customers in on one product and then sell them that product and this product. But from my personal experience — and I'm a Westpac private banking customer — every time they introduce a new person to me the first thing they do is try and flog me life insurance and I get sick of that.

“What I have learnt from our online-only lender [] is that there is absolutely no customer loyalty to the customer of the future. The online customer, the customer of the future, will shop to get the best home loan, the best car loan, the best credit card and the best insurance from whoever is offering it, whether it be a bank, non-bank, direct to a lender or through a broker. They won’t care whether it is from the same company.

“Here we are with all these banks gearing up  for the customer of the future to get everything but that customer will be smarter than what they might think. If we have a great home loan, that is all we are going to sell you. We are not going to flog you life insurance.”

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