Landmark report predicts shift just as realestate.com.au and Domain move into broking
Landmark report predicts shift just as realestate.com.au and Domain move into broking
Non-financial platforms will put mortgage brokers out of business, according to a major report by the World Economic Forum and Deloitte.
The report, Beyond Fintech, predicts that “non‐financial platforms [will] effectively replace the traditional broker channel, and derive additional customer loyalty from having customers locked in to their ecosystem.”
Looking at financial systems across the globe, the report points to firms like Amazon, whose B2B Amazon Lending division who grew from $0 to $3.8bn in lending in six years. Australian brokers are already seeing competition from non-financial firms, with property listings websites realestate.com.au and Domain.com.au entering broking in June.
The World Economic Forum predicts that banks will form partnerships with non-financial firms who are able to better distribute their products, just as NAB recently partnered with realestate.com.au to launch a realestate.com.au-branded brokerage, benefitting from the website’s near 5.9m unique visitors a month.
Why the shift happens
Brokers will be displaced by a four-stage process, according to the report.
In the first stage, the commoditisation of lending forces established lenders to look for new ways to acquire customers and data on their current customers. Then, according to the report “lenders form partnerships with non-financial platforms to use their data and offer loans through their user interfaces.”
By the third stage, banks use their partners’ data to make more efficient lending decisions and thus offer cheaper loans, as well as targeting them at customer needs. Finally, the non-financial platforms displace traditional brokers, partially because of the strength of these partnerships and partly because they have loyal existing customers who are “locked into their ecosystem.”
Not in the future, but here today
The past two years have seen all four steps occur in Australia, albeit to a limited extent.
NAB’s search for new customers arguably began with its acquisition of Challenger and its mortgage aggregators: the realestate.com.au partnership reflects the vast advantages the listing site has over individual brokers given the huge size of its customer database.
In 2015, Westpac began a partnership with high-speed business lender Prospa, which uses data to make quicker, more targeted lending decisions. However, Prospa continues to work with brokers, who have the advantage of long-term relationships with many business customers.
However, with brokers accounting for 51.5% of residential loans in June quarter, non-financial firms are yet to make a serious dent in the third party channel.
Non-financial platforms will put mortgage brokers out of business, according to a major report by the World Economic Forum and Deloitte.
The report, Beyond Fintech, predicts that “non‐financial platforms [will] effectively replace the traditional broker channel, and derive additional customer loyalty from having customers locked in to their ecosystem.”
Looking at financial systems across the globe, the report points to firms like Amazon, whose B2B Amazon Lending division who grew from $0 to $3.8bn in lending in six years. Australian brokers are already seeing competition from non-financial firms, with property listings websites realestate.com.au and Domain.com.au entering broking in June.
The World Economic Forum predicts that banks will form partnerships with non-financial firms who are able to better distribute their products, just as NAB recently partnered with realestate.com.au to launch a realestate.com.au-branded brokerage, benefitting from the website’s near 5.9m unique visitors a month.
Why the shift happens
Brokers will be displaced by a four-stage process, according to the report.
In the first stage, the commoditisation of lending forces established lenders to look for new ways to acquire customers and data on their current customers. Then, according to the report “lenders form partnerships with non-financial platforms to use their data and offer loans through their user interfaces.”
By the third stage, banks use their partners’ data to make more efficient lending decisions and thus offer cheaper loans, as well as targeting them at customer needs. Finally, the non-financial platforms displace traditional brokers, partially because of the strength of these partnerships and partly because they have loyal existing customers who are “locked into their ecosystem.”
Not in the future, but here today
The past two years have seen all four steps occur in Australia, albeit to a limited extent.
NAB’s search for new customers arguably began with its acquisition of Challenger and its mortgage aggregators: the realestate.com.au partnership reflects the vast advantages the listing site has over individual brokers given the huge size of its customer database.
In 2015, Westpac began a partnership with high-speed business lender Prospa, which uses data to make quicker, more targeted lending decisions. However, Prospa continues to work with brokers, who have the advantage of long-term relationships with many business customers.
However, with brokers accounting for 51.5% of residential loans in June quarter, non-financial firms are yet to make a serious dent in the third party channel.
