Industry veteran warns brokers of online threats

“You’ve just got to look at UBank and Loans.com.au and the product and the rates they are offering and you have to say that people have adapted to the straight purchase or the straight refi,” he said.

“The biggest threat to brokers is how retail banks find their way to the customer again, and it’s not going to be over the counter – it will be through technology.”

Mr Phillips believes technology will play an increasingly important role in mortgage distribution.

“The biggest threat is going to be how banks can make third-party transactions get closer to the customer. That may not be using the broker; it may be using technology and other forms of connection,” he said.

“The banks have done a magnificent job of taking a lot of business and most of the market over the last few years. The hardest part now is to hang on to it. If it doesn’t come through a branch, I would suggest the biggest risk to the broker will be technology and the banks interacting with customers in new ways.”

Vincent Turner of the US-based financial services software start-up Planwise, in which Mr Phillips is a significant investor, says that for banks to successfully acquire retail customers via an online channel requires two things.

“One is the quality of the experience you are able to give that person online,” Mr Turner said.

“Unfortunately for every major bank and for financial services in general, consumers have an expectation now that everything will work as well as Facebook or Uber or any of these wonderfully designed, well thought-out applications.

“There is no reason why the interaction you have with your bank, whether through the device or sitting behind the device, shouldn’t be as good as the interactions you have with these beautiful start-up applications.”

However, Mr Turner said banks face fundamental obstacles.

“Their cultures are not engineered for creating an amazing product or service experience through technology,” he said.

Mr Turner argues that the proposition itself has to be different.

“If you just have the convenience of getting online but then get the same rate you will get everywhere else, because they haven’t used the technology to rip out a bunch of cost on the back-end, if that reward doesn’t exist, then it is very hard to convince a consumer to come online," he said.

Australia’s largest bank has a firm eye on digital channels. According to CBA group executive Kelly Bayer Rosmarin, more than 65 per cent of the lender’s transactions occur on a mobile phone or iPad.

Meanwhile, non-bank lender Firstmac has made significant inroads with its online alternative, Loans.com.au.

Mortgage Ezy chief executive Peter James believes such moves reflect a “sense of desperation” among the non-bank players.

“When you’ve had massive decreases in market share, many of these long-standing non-bank lenders and mortgage managers have found their viability marginal to say the least,” Mr James told The Adviser.

“You are seeing very large companies entering into the retail space. The cost to brokers is enormous.”

Mr James said it is “more than a conflict” when a non-bank offers online loans in addition to distributing through brokers.

“It’s an absolute slap in the face for the brokers that they intend to still deal with,” he said.