An Australian bank has revealed that it made the “strategic decision” to avoid the third-party channel, instead partnering with another lender to build scale.
QT Mutual Bank and RACQ this week announced plans to create a new customer-owned banking service, leveraging the considerable assets and capabilities of RACQ’s large membership base.
The proposed merger will establish a banking subsidiary within the RACQ Group, alongside its assistance, insurance and lifestyle operations which service more than 1.5 million members in Queensland.
QT Mutual Bank chief executive Steve Targett told The Adviser brokers are not part of the group’s plans.
“We are probably quite old fashioned as organisations and think that we can penetrate that market direct,” Mr Targett said.
“We don’t use [brokers] at the moment. Part of the reason we haven’t done it is because there is certainly a cost associated with doing that. We felt at our size we wouldn’t get the quality of business we wanted and so what we have done is tried to focus on doing our relationship management direct,” he said.
“There is a price associated with it both in terms of the margin you pay, the trail, the internal costs and you’re not guaranteed to get the quality end of the business.
“We have strategically decided to stay out. A lot of people have dipped their toes in because they can’t find growth any other way. We have worked really hard to find the right merger partner so we don’t have to go into the broker market.”
Mr Targett said the mortgage distribution benefits of merging with RACQ were massive.
The mutual lender currently has 60,000 members, while RACQ has more than 1.5 million members.
“It’s huge. What we want to do is reach into their customer base and sell them a better mortgage product. If we can get a small penetration there, we can get a huge amount of growth,” he said.
“If we get the basics fixed in terms of our banking platform, combined with a great brand like theirs, and if we can come up with better pricing than we have at the moment – which is even better than the big banks – then we think we will have a proposition that stands out.”
RACQ chief executive officer Ian Gillespie said the group was aiming to be a trusted alternative to the “shareholder-owned, profit-driven banks”.
“The merger will offer greater benefits to members of both organisations, with a highly compatible suite of premium products and services, and a common focus on delivering exceptional service and value,” Mr Gillespie said.
If successful, the formal merger of the two organisations is expected to be completed by the third quarter of 2016.
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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