If there’s one segment of the lending industry that’s not afraid of a new idea, it’s non-banks. From technology that uses data to slash the time needed to apply for a loan to creating innovative new products that make the most of emerging market opportunities, non-bank lenders have the nimbleness, agility, and willingness to explore new ways of working.
And with plenty of healthy competition in the non-bank lending space at present, there’s a sense that this open-mindedness and client-first thinking will only continue.
All of this is good news for brokers and borrowers, who benefit from streamlined processes, flexible solutions, new products, and a more personalised approach to lending.
As the non-bank lenders continue to move with market trends, evolving to meet customer needs, they’ll remain a compelling credit option for brokers to explore.
Innovation first
So, what makes non-bank lenders so good at embracing innovation and creating new products? Part of this is down to the make-up of these organisations when compared to traditional lenders, according to Firstmac chief financial officer James Austin.
Non-banks typically have less bureaucracy, allowing us to make decisions and implement changes faster
James Austin, chief financial officer, Firstmac
“Non-banks typically have less bureaucracy, allowing us to make decisions and implement changes faster. This agility enables us to adapt to new technologies and new market demands like green lending, more quickly than traditional banks,” Austin says.
This willingness to try new ideas means non-bank lenders can explore emerging technologies and create products to cater to segments of the market that, for whatever reasons, don’t typically get a lot of love from more traditional lenders.
“We can focus on specific underserved markets, which drives innovation to meet the unique needs of these segments. Big banks, on the other hand, tend to focus on a broader range of services, which can dilute their ability to innovate in any one area,” Austin says.
“Many non-banks including Firstmac are privately-owned or smaller companies with a culture that encourages innovation and out-of-the-box thinking. In contrast, the corporate culture in big banks can be more traditional and resistant to change.”
At your service
Technology is one pillar of innovation many non-bank lenders are already leaning on to enhance their reputation for customer service.
Ben Cutler, chief customer officer at ScotPac, says the non-bank lender is using tech to deliver what their small and medium-sized enterprise (SME) clients are looking for – speed, ease, and simplicity.
“They want to be able to have a simple and easy process to go through in terms of application. They want to get answers fast. They still want to have the flexibility to have things that have solutions that adapt to their needs. And they want it to be easy because they want to focus on their business,” Cutler says.
“As non-bank lenders, that’s why we exist, because we’re able to do that and continually do that. Technology just now lets us accelerate that and do it better.”
Cutler says many of ScotPac’s popular loan products use connections into data sources that speed the information gathering process, making it easy for businesses to provide the necessary information and helping the non-bank lender get to a yes as quickly as it can.
“We’re continually understanding how to improve service speed and understanding, ultimately, what is important to them and from there,” Cutler says.
“We’ve got the advantage of not having longstanding legacy technology stacks, like a lot of the bigger players and the majors. It means we can be very nimble in terms of turning around new products that meet those needs and innovating within the solutions that we have.”
Matter of choice
But process improvement is just one piece of this puzzle. Product innovation is another area that showcases the benefits of non-bank lenders being open to new ideas and how they create new products and shift to meet market demand.
The response of many non-banks to the recent surge in demand for green products such as electric vehicles (EV) provides the perfect example.
Demand for EVs in Australia is rising – in April, market researcher Roy Morgan revealed that there was an 11.3 per cent increase in the number of Australians planning to buy a hybrid or fully electric vehicle (1.9 million) over the next four years – and many non-bank lenders have created innovative products to serve this growing market segment.
Last year, Firstmac partnered with the government’s ‘green’ bank, the Clean Energy Finance Corporation (CEFC), to create an EV loan product. A $40 million investment from the CEFC provides eligible borrowers with a 0.5 per cent discount on the standard finance rate of purchase, matched by an additional 0.5 per cent discount from Firstmac.
Other non-bank lenders such as Pepper Money and Metro have also released credit lines that cater for this demand by incentivising the purchase of green products with favourable rates.
For Austin, non-bank lender product innovation demonstrates not just the benefits borrowers stand to realise from having access to new products, but why it’s so important for them to have options outside of the more traditional lenders.
“The most important reason is that more lending options fosters competition, which leads to better loan products, lower interest rates, and better customer outcomes as lenders compete for business,” Austin says.
“Non-bank lenders often offer a variety of loan products that might not be available at traditional banks, catering to different needs and financial situations. Non-bank lenders such as Firstmac are also more committed to the third-party channel, so we will always be there while the major banks come and go.”
The broker opportunity
For brokers, the opportunity is clear. By implementing new technologies, non-banks are able to offer an enhanced lending experience to borrowers. And by creating new products, non-banks can open rich new veins of finance that meet demand from borrowers for new products.
All brokers have to do is make sure they get these products in front of their customers.
“Access to innovative non-bank products, such as green loans, enable brokers to stand out, grow their client base, and align with market trends toward sustainability,” Austin says.
“In the case of our green loans, they also enable brokers to help their customers save money. It gives them the opportunity to open up new distribution channels or referral sources within their business by having a unique product that they can take to market.”
Cutler says it’s ultimately about understanding what the customers are looking for.
“[Brokers] are trying to meet the needs of their client,” Cutler says.
“So they need lenders who can do that. Technology in the lending space is certainly changing the game for brokers. It’s making their role even more important, because there are options now that weren’t there before.”
