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Look beyond loan pricing, focus on brand: UBank

A digital bank has questioned the viability of lender cashback offers for borrowers and has argued for the need to offer a robust banking proposition beyond home lending.

Lachlan Davidson, the head of marketing at National Australia Bank’s (NAB) digital division, UBank, reflected on the various cashback offers available in the market from lenders, pointing out that there were only one or two such offers in the market a couple of years ago.

He noted that some lenders have been offering up to $4,000 in cashback offers, which he said was a significant amount.

“If we think about opportunities for marketers or businesses or brands to attract customers, my question then, and I suppose challenge to everyone is, how far do we want to go?” he asked.

Speaking during a webinar panel discussion on the future of mortgage lending, hosted by Finder, Mr Davidson said that with lenders already compressing their margin with pricing, and offering cashback incentives for customers, he wondered how far this could progress from a profitability perspective.

“At what point do we take ownership of the fact that we need to trade on more than just the price and just the offer?” Ms Davidson asked.

Mr Davidson believes that the longer lenders continue attempting to attract customers on price and cashback offers, the more they will “train” customers to behave in this way.

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He also noted that with lenders seeing an increasing share of refinancing from borrowers over the last six months during the coronavirus crisis as property purchasing opportunities have reduced, it could start to erode the inertia that has existed around home lending, with customers typically having a long tenure with their financial institutions and their home loan.

“I wonder whether it’s shot-term gain for long-term pain for lenders,” he said.

Addressing the issue of retention of customers by lenders in this environment, Mr Davidson posited as a marketer that lenders need to shift their minds to what their proposition is beyond home lending, and attempt to “capitalise upon this shift to certainty that customers want”.

In order to do this, Mr Davidson argued that banks must offer an optimal overall banking experience for their customers.

“That I think is going to be a massive battleground in the next little while,” he said.

Furthermore, Mr Davidson believes that Consumer Data Right (CDR) will contribute significantly to enabling customers to switch providers and secure better deals, which he emphasised is in the customers’ best interests.

“But as a brand, we need to be thinking harder than ever about the service that we provide to those customers along the way so that when they’re presented an offer to switch, if it’s not the right thing for them, you’ve at least got the first right of refusal to try and keep them,” he said.

The challenge for banks – such as UBank – is to offer a distinctive brand experience for customers, according to Mr Davidson, who said that it has been a challenge for the digital bank to spread awareness that it offers home lending services.

“I think it’s really important for us all to be thinking about how we [can] be a little bit more distinctive in the way that we turn up for customers,” he said.

“That ties into the brand experience you give to customers. Let’s get them to buy into your brand beyond just the interest rate that they see in their app all the time. Let’s get them to buy into an ethos, a mentality and experience, which is the difficult and expensive bit to do.”

Mr Davidson said that over the course of this year, he would like to focus on the specifics of why customers would choose UBank.

“Part of that I think has to do with how they feel about the brand,” he said.

“Getting into an era of easy profitability of loans, potentially enabled through Consumer Data Right, is a little bit scary for me in a way. As I said before, it’s great for customers.

“But I really want to make sure that the UBank brand is a solid foundation that people buy into, and it means that they're caring less about the price and more about the brand and experience that they get.”

[Related: Refinancing up 27% so far this year]

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