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The development of AFG’s new Sparc mortgage, funded by Volt, will be determined by broker feedback, the chief executives of the two companies have revealed.
On Wednesday (3 November), Australian Finance Group Ltd (AFG) announced that it had soft-launched a new white-label home loan product, “AFG Home Loans Sparc”, and a personal finance management (PFM) app “Handl. by AFG”, both powered by Volt’s banking-as-a-service (BaaS) platform.
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The two products, which are currently being piloted by a group of 125 AFG brokers and their customers, are expected to roll out more broadly to all AFG brokers early next year as part of the AFG-Volt partnership.
Speaking to The Adviser, both the CEOs said the home loan product and the Handl. app will be tailored to meet broker requirements.
The chief executive of AFG, David Bailey, commented: “At this stage, this is a pilot, [and] we are looking to roll this out in February across our whole broker distribution. So we want to make sure, like we’ve done with every other white label product that we’ve released into the market, that we do it as a pilot, we iron out any kinks, and we make sure the customer and the broker [are] comfortable with the product and how it works.”
While the current AFG Home Loans Sparc loan, funded by Volt Bank, is a “vanilla” mortgage product of up to $1.5 million targeting PAYG customers on loans with sub-80 per cent loan-to-value ratios (LVR), the expectation is that more variants of the Sparc product will become available in due course.
“Our design is that Volt will step out the type of product that Sparc is, over time,” Mr Bailey said.
Steve Weston, the founder and chief executive of Volt, told The Adviser that he expects the Sparc product will cover “90 per cent of the mortgage market” by March 2022.
The Volt Bank CEO explained: “Today, we have a simple variable rate product for refi and purchase. In the next month, we’ll bring down the first of the fixed rate products to market – which [comprise] something like 40 per cent of the market at the moment. So, if you think of the mortgage pond, we’re missing 40 per cent.
“Twenty-odd per cent is usually self-employed and that will be next,” he continued, outlining that Volt is working on a “digital self employed product for those self-employed customers that you can automatically assess income and expenditure for”, which is pencilled in for piloting with AFG brokers “first thing in the new year”.
Following the self-employed segment, Mr Weston suggested that the next phase would target higher LVR loans (over 80 per cent LVR).
“So by the time we get to March, we’ll have most of the products there and then we will be working with the AFG broker team to ask for feedback and see what is it that they think will work for their customers next, rather than going out and having full roadmap built out for the next couple of years,” Mr Weston said.
“We’ll also do things like expanding the credit criteria, maximum loan size increases, etc.
“So, you start off small and build, build, build, test, and then expand. That means, by the end of March next year, we’ll have 90 per cent of the market covered.”
Similarly, the two CEOs suggested that the new Handl. by AFG app, which will be made available for AFG Home Loans Sparc product customers, will also be tailored off the back of broker feedback.
Mr Weston told The Adviser: “The things that we will work on with David and the AFG team, are [around] how can we make it easier for customers to apply for a home loan, particularly in the AFG white label space?
“We’re using automated income and credit verification, digital identification, digital signing of documents, and using automated valuations as often as we can. That’s how we get the turnaround times for unconditional approval down to under an hour, and then using some of the capabilities that exist today to get the refis knocked over in a week. These are transformationally different service levels.
“That’s all part of this pilot work with AFG’s 125 brokers; asking what makes brokers really comfortable in recommending a Sparc home loan, compared to anyone else.”
Mr Bailey added that the new Handl. app would not only help meet customer demand for financial management support, but also help brokers interact with their customers digitally and potentially “ringfence” customers who may use external PFM providers (and could be then converted to external lenders/lending products).
The AFG CEO said: “If you look at the AFG Home Loans stable of products, this is the first product we have which… comes with the digital banking application.
“By having the personal finance manager attached to it, it’s a point of differentiation for those customers looking for something different from their financial services provider.
“It’s the first step of us moving into being capable of helping our brokers (and our brokers’s customers) deal with open banking as it evolves, but also accessing new technologies, which, frankly, would take a longer time to develop if we were to do it ourselves. So we’re partnering with Volt to bring something to the market at a faster pace.”
Mr Weston added that there was a growing demand from borrowers to access “integrated finance” offerings (where their financial information is curated across different platforms), such as the Sparc and Handl. offering, adding that he believed modern borrowers are generally “more inclined to work with a trusted partner that makes their life easier” and “tailors something for them that helps them in a way that incumbent financial services providers haven’t done”.
[Related: Major aggregator launches PFM app and white-label loan]
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