As new lenders steadily come onto the scene, bringing new funding models and innovative products, competition has reached a near fever pitch – threatening the market share dominance Australia’s major banks have held for so long.
Speaking at the RFi 2020 Australian Mortgage Innovation Summit, executives from two of the big four gave candid insight into how these shifting trends have been and will continue to impact the trajectory of their institutions.
NAB head of product team, Byron Donovan explained, “The old days of having to fund a home loan book are changing and evolving, so you have the likes of Athena coming in, who are able to isolate and target a segment of the market and do that very well.
“The days of big banks being able to be everything to everyone gets harder when parts of the market are being picked off and serviced in a different way.
“For us, it’s how we face into that threat, but equally being conscious of staying true to our strategy and what we think is going to keep us on the right path.”
Westpac head of customer engagement for home ownership, Joel Larsen, echoed a similar sentiment.
“We’re facing challenges around the long-term loyalty of customers to mortgages. Mortgages have traditionally been a 30-year relationship with the bank. That relationship is getting a lot shorter. People have more options now,” he said.
According to Larsen, Westpac does the hard work of helping Aussies into their first home only to have new lenders sweep them away once they’re established – an issue for which the bank is currently brainstorming solutions.
“We do a lot of the work with the consumer early, getting them into the property market, and then someone else comes along and takes them off a few years after that. That to me is the biggest thing that Westpac in particular, and other banks, are having to deal with,” said Larsen.
“The competition that’s entering the market has very much worked out there’s a big back book of those customers that have been through that process, that have been through that pain, that have built a relationship with their bank, that are now able to switch.”
Larsen highlighted that those customers are then able to find a good deal elsewhere given that they’ve built equity in their property since securing the initial loan through Westpac; additionally, the cost is lower for the subsequent lenders who focus on refinancing rather than the initial home purchase.
“The major banks have to make sure they’re presenting enough value to customers throughout the life of their loan,” he concluded.
