The emergence of digital brokers and online mortgage lenders shows no signs of abating, with overseas players now looking to disrupt the Australian home loan market.
For many years, the tech giants of the world have posed a threat to traditional banking models. Apple has already muscled in on the payments space. Google soon followed with the launch of AndroidPay, which became available to Australians in July last year.
However, not all attempts by tech giants to break into financial services have been successful: Google’s insurance play, Google Compare, was abandoned in March last year.
Speaking at the AltFi Australasia Summit in Sydney last year, Macquarie’s head of corporate development and strategy for banking and financial services, Ben Perham, was asked about the threat “digitisation” posed to the big banks.
“The ambitions of Apple and Google and so forth are hard to predict, they probably change a lot,” Mr Perham said. “But certainly, when we talk to them, they’re not interested in being a regulated financial services business.”
He noted that Apple and Google are, however, definitely interested in “participating” in the fintech space – with the payments area “critical” when it comes to digital disruption.
“But that’s at the level of customer interface rather than at the level of the rails that actually run the payments system,” Mr Perham said.
“So I’ve got no doubt that Apple’s got big aspirations and obviously a lot of cash to do whatever they like, but in terms of the next evolution of change, I don’t see that coming so much from Apple and Google.”
Mr Perham said he is confident the top five Australian banks will still be around in 20 years’ time.
“Personally, I don’t see us being replaced. [The rise of fintech is] more about partnering,” he said. “I’d be very, very surprised if the largest five banks in Australia aren’t the largest five banks in 20 years’ time.”
In lending, personal loans and SME finance have been the core markets for peer-to-peer (P2P) or marketplace lenders. For a long time, mortgages were considered an unrealistic market for new digital entrants.
This appears to be changing. Mortgage Business revealed last week that US-based online lender SoFi was eyeing the Australian mortgage market after posting a handful of job ads on LinkedIn. While the group is yet to formally announce its plans, its search for a Sydney-based mortgage operations manager who will be responsible for building an “in-house mortgage customer service and underwriting operation to serve SoFi’s new mortgage business line” is pretty clear.
Meanwhile, REA Group, the parent company of real estate listings giant realestate.com.au, is preparing to launch its own mortgage offering through a joint venture with NAB.
This play has been in progress for a while. REA Group hired former Mortgage Choice general manager Andrew Russell in November 2015 and tasked him with developing the company’s financial services strategy.
The decision to partner with a major bank is significant for a number of reasons. It shows NAB’s willingness to join forces with web-based, digitally-savvy groups as an alternative distribution channel. It also sends a message to the market that new entrants and incumbents can work together.
A 2016 financial services report by Fujitsu, which surveyed senior financial services decision makers and consumers across Europe, found that the ‘Uberization’ of the financial services sector remains a persistent threat. But not everyone agrees with this assessment.
Rodney Maddock, a former CBA executive and interim director at the Australian Centre for Financial Studies, believes successful disruptors like Uber and Airbnb are not transferable to the financial services space.
“I just think disruption is massively oversold,” Mr Maddock said.
“Everybody is really hooked on the examples of Uber and Airbnb. If you look at what happened in those cases, it was a big lot of resources – cars or houses – which were not being well used,” he said.
“The business models are basically built on exploiting underutilised resources. So yes, I can see disruption in those things. Come back to the financial market, you have to ask: where are the big bunches of underutilised resources that people can attack? It’s a lot harder when you start to think about it that way.”
Mr Maddock said he cannot see new entrants creating any permanent disruption to the industry.
“I guess I am a bit more sceptical about the whole disruption argument because disruption is most powerful where it uses resources that are not currently being used. I don’t see any of those in finance.”
Thomas Achhorner, head of digital financial services at PwC Asia, argued that 98 per cent of fintech lenders will fail as big banks copy their models.
He added that banks are working tirelessly to produce online mortgages.
“It is fair to say that an online digital mortgage is something that every bank in this country is currently working on,” Mr Achhorner said. “Not only the mortgage itself, but a broader, ecosystem-based experience starting from the real estate purchase all the way to insurance and everything that happens downstream from the mortgage.”