Bank CEOs quizzed on turnaround differentials

When appearing before the committee, the CEO of ING Australia, Melanie Evans, was asked by the committee’s deputy chair, Dr Andrew Leigh MP (member for Fenner), how the bank had been able to consistently deliver speedy turnaround times, when major banks had not.

Dr Leigh highlighted the findings of Momentum Intelligence’s Broker Pulse survey, which collates the collective lending experiences of residential mortgage brokers each month in a bid to help them make more informed decisions.

He noted that the February 2021 survey showed that ING’s average time to initial credit decision for broker-lodged loans was four days, in equal place with Macquarie Bank, while “at the other end of the spectrum”, Westpac was at 20 days and therefore “taking five times as long as ING to approve loans” (in February 2021, the most recent Broker Pulse survey, from May 2021, shows that Westpac’s turnarounds were around 18 days, while ING remained at four days).

“Why is it that Westpac has done so badly, compared to ING, in terms of time to initial approval?” Dr Leigh asked Ms Evans.

In her response, the ING CEO said: “Let me talk about ING, that’s what I’m here to talk about. I’d say a few things there: this is a metric that matters to us and it’s something on which we compete... There is no more important metric for customers (though there might be a few others that come into it for certain customers) than to have decisions that give them a firm view about whether or not they’re able to buy the house/upgrade into the housing market. So, it is a number that, I dare say, we obsess about. 

“We make sure that we resource our teams appropriately, and we’ve spent significant time with those members of our own team, who are responsible for that process, making sure that our back-end system, our data etc are [digitised].

“And, most importantly, our use of communication with customers when they’re going through the home loan approval means that we can provide that more quickly,” she said.

Mr Leigh pushed Ms Evans on her answer, emphasising that there was a “disparity in the kinds of institution that are at the top” (of turnaround time speed, according to Broker Pulse), noting that non-major banks were at the top, while the major institutions were among the slowest to reach an initial time to yes.

“What is it, systematically, that’s going on? I suppose I’m asking you to not only talk about what ING is doing, but also what on earth is happening in the sector that has such a huge spread between the best and the worst performers?” Dr Leigh asked.

Ms Evans continued: “I think there’s a number of things I would hypothesise that drive those differences. The first is how important that measure is to you. We have our mortgage operations team onshore here in Australia. That means that if that cycle time, or time to yes, starts creeping out well beyond the three to five days, we’re able to move other team members who are cross-trained in providing that service into that workflow so that we can actually manage our customer experience. 

“So, if you are committed to that number, you’re managing it appropriately, and you’re making decisions about where you’re putting your money and resources, and ensuring that you’re aligning those two processes or customer experiences that matter the most.”

The ING Australia CEO continued that the bank’s work in adopting digital signatures early on had also helped, noting that the bank already had a digitisation program in place when COVID-19 hit, so – once allowances were made for banks to adopt digital signatures (rather than wet ones) – ING “pretty much turned that on straightaway, which meant there was no snail mail or no scanning and sending of documents... We moved to that digital signature for home loan approval very quickly”.

She continued: “I compel the committee to look at what we can do in terms of [digitising] the settlement process as well, because I think we can all make that an easier and more simple process for customers too.”

Ms Evans concluded: “Thirdly, I’d say there is probably a [theme of] composition of customer base that might be driving some of those differences… depending on how complicated your customers are, how ready they are to go through the application process, that can absolutely drive whether or not the customer gets it right the first time or needs to resubmit [information], so I’m sure that has something to do with it as well.”

Call to fix discharge delays

Later in the hearings, two other non-major bank CEOs were asked about turnaround times when it came to excessive delays in discharging loans.

The committee noted that the Australian Competition and Consumer Commission’s (ACCC) final Home Loan Price Inquiry report, released last year, had recommended that existing lenders should take no more than 10 days to discharge a loan. 

The CEO of SME lender Judo Bank, Joseph Healy, was then asked whether he would urge the government to act on this recommendation (the government has yet to respond to the report).

Mr Healy responded: “Yes, I would… I’ve been approached by several smaller banks and non-bank lenders who shared the exact same frustration [as me on this]. 

“It’s anti-competitive behavior to take almost 60 days to do something as simple as providing a settlement figure and discharge of existing security, allowing businesses and consumers to make choices of transferring to other lenders.”

Similarly, the CEO of neobank Volt Bank, Steve Weston, agreed, stating: “The same applies for home loans [as SME loans].

“Quite often, a customer will go to a mortgage broker and say: ‘I want a better deal’. The first thing that a broker will do is get on to the existing lender and say: ‘Can you give a lower rate?’ And the lender says: ‘No, we can’t’. And so the broker goes and helps the customer refinance and that can take three weeks, or whatever, to get an approval, and then request a payout figure and discharge the mortgage from the incumbent lender.

“But the incumbent lender [then] hands that matter, after a couple of weeks, to their retention and the retention team phones the customer and matches the rate that they couldn’t match a month or so earlier. And so, of course, everyone is frustrated,” he told the MPs.

Mr Weston added that, as a digital bank, Volt Bank has had to innovate the process to ensure that it can not only approve loans quickly, but also ensure borrowers are discharged from their old loans quickly.

The Volt Bank CEO said: “In our case, not only can we approve mortgages (for a reasonable percentage of customers) in 15 minutes, we can discharge the mortgage for a number of lenders within two days, or within a day.

“We are using a different method so that you don’t wait for the payout. [We] pay them out, and [we] write to the bank and say: ‘We have paid you out, please prepare the discharge of mortgage’.

“And that’s only come about because of the delays in discharge and the frustration with retention teams coming into play at the last minute,” he said.

You can find out more about how the non-major banks have been gaining broker market share and higher broker approval ratings in the July edition of The Adviser magazine, out now.

Find out more about the Broker Pulse initiative via Momentum Intelligence, and learn more about the issue of delays in broker channel turnaround times in last month’s edition of The Adviser magazine.

[Related: Non-majors in the spotlight]