Lenders react to digital threat

Australian lenders are sharpening their digital toolkits as supermarkets and digital giants continue to penetrate financial services.

The Deloitte Australian Mortgage Report 2014 surveyed a panel of major lenders, non-banks and large broker groups and found that new online channels will be the greatest non-major mortgage competitors of the future.

Mortgage Choice chief executive Michael Russell said the strong digital brands are a concern.

“Google, Yahoo, Coles, Woolworths and Apple are the ones that alarm me in terms of their capability to quickly morph into a financial services business,” he said.

NAB Broker general manager Steve Kane agrees competition will come from new online channel lenders.

“But not merely ‘new’ entrants such as the supermarkets coming into banking,” Mr Kane said. “That’s where there’s likely to be change.”

ING DIRECT executive director of distribution Lisa Claes told Mortgage Business the digital giants such as Apple, Google and PayPal could be successful in the mortgage space.

“There is a credible school of thought that they will continue to penetrate financial services,” Ms Claes said. “The digital giants could be successful.”

The threat of new entrants is also on the regulator’s radar and has been a main theme of the Financial System Inquiry.

Speaking at the ASIC Annual Forum in Sydney in March, ASIC deputy chair Peter Kell said digital players and consumer brands are in the regulator’s sights.

“Do we anticipate that there will be a potential range of new players that we will have to deal with within a fairly short space of time?” Mr Kell said.

“I would say definitely yes, and some of them are already there,” he said.

“You can see some of those big supermarkets, for example, wanting to sell insurance and potentially moving into other financial products, and we will be ensuring we have a level playing field and making sure they treat customers fairly.”

On 8 April Mortgage Business reported that retail giant Coles had engaged a third-party distribution specialist to evaluate plans for the supermarket to begin distributing residential mortgages.

“Tesco in the UK has a banking licence and is cross selling into basic banking services,” ING DIRECT’s Ms Claes said.

“That has been in and out, but it is more in than out at the moment and they are maintaining their investment,” she said. “That alone sends a certain message.”

Industry figures have flagged the potential for Australia Post to broaden its financial services offering and leverage off its distribution network.

However, when asked if it would further its financial services offering to include mortgages, Australia Post said it has no desire to become a bank.

“Australia Post has no intention of becoming a bank,” Australia Post spokesperson Michelle Skehan said.

“Australia Post is a proven trusted services provider and has a demonstrated track record delivering important community services such as passport applications,” Ms Skehan said.

“Our focus is on growing these trusted services.”

While the digital race occupies one side of the inquiry, the discussion around Australia’s corporate regulators is also on the agenda.

Some groups feel that Australia’s current regulatory landscape prevents lenders from adopting digital platforms to keep pace with customer demand, according to Deloitte partner James Hickey.

“That is often part of the challenge for many lenders and originators – the ability to actually share due to the privacy laws some of that information that is obtained in different channels across different parts,” Mr Hickey said.

“It’s always going to be a beneficial tension in the market,” he said.

 

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