Neobank 86 400 has reported rapid growth in its digital mortgage offering during COVID-19, citing an uptick in broker lodgements during the lockdown period.
The digital mortgage lender (named for the number of seconds in a day) first launched its home loan products in November 2019 exclusively via the broker channel. It has grown over the past seven months to $40 million of loans settled or awaiting settlement.
According to 86 400 CEO Robert Bell, this growth can partly be attributed to its aggregator partnerships that have enabled it to accredit more brokers, but also due to the fact that it is a “completely digital mortgage, which means [borrowers] don’t have to go to a branch to do ID and don’t have any paperwork”.
Speaking to The Adviser, Mr Bell said: “It comes back to scale and efficiency for us. We don’t have branches, so if we hadn’t done [remote verification of identity], for example, our customers would have had to go to a post office, and that is not a good experience because you have to queue up and wait, it’s fairly expensive and it’s just not convenient.
“From day one, we designed everything at 86 400 to be online and digital straight through. It was just obvious for us that we had to make every step of the mortgage process, including ID, digital for brokers. Which is why we went with the MaxID product, which we use for identification.”
According to the CEO, this fully digital mortgage process has meant that, while the bank soft-launched the mortgage product through the broker channel at the end of last year, it had “only really ramped up mortgage growth in the last six to eight weeks” [during COVID-19 lockdown].
“We’ve actually been rapidly growing mortgages and our mortgage business in COVID-19, which is incredible,” he said.
While Mr Bell said the digital mortgage process was what had “really got brokers’ attention”, he added that the bank’s rates were also “competitive” (its lowest advertised rate is currently 2.29 per cent for a three-year fixed rate [2.98 per cent p.a. comparison] for PAYG borrowers with 80 per cent LVR) and its turnaround times were around 24 hours, while several lenders have seen turnarounds blow out to weeks.
The 86 400 CEO revealed that the bank has seen a surge in borrowers looking to refinance during COVID-19, noting that the pandemic has “really focused people on their personal budgets, their household balance sheets”.
“I think one of the reasons that brokers are really shining in this market is that they can help people save money, and people need to save money more than ever, at the moment,” he said.
The neobank CEO added that the digital mortgage process was also less cumbersome for brokers as they are not required to collate bank statements (as the bank utilises screen scraping technology to aggregate that information).
“So, we have less paperwork, which ultimately means it’s much easier for brokers to write,” he said.
Data insights the next port of call
The neo-lender is now celebrating its first anniversary of being a bank, over which time it has gained more than $300 million in customer deposits and processed more than $1 billion in transactions.
86 400 said the bank’s “next phase” will focus on “delivering even greater insights to help customers take control of their money”.
While the bank is currently completing its rollout of “everyday” banking products and features, including scheduled and recurring payments, it stated that its new focus will be expanding into new segments such as shared finances and delivering further insights into individual spending and savings patterns.
Mr Bell told The Adviser: “It’s all around helping Australians take control of their money but without being intrusive or lecturing them. It’s just giving them deeper, enriched insights into their spending; for example, how much they are spending at Woolworths. It is all about helping them understand where their money is going.”
He continued: “The key thing for us is being able to see, in one place, your Westpac account, your NAB account, your credit card, your home loan, no matter where you bank, you can see all your accounts – across all your banks – on 86 400. No one else shows you that kind of full picture.”
Mr Bell concluded: “With so much economic uncertainty at the moment, it’s more important than ever Australians feel on top of their finances. Our next phase of growth is going to do just that – deliver the features they wouldn’t expect from a traditional bank, which will help customers budget better, spend wiser and save more.”
To fuel further growth, 86 400 will soon begin a Series B capital raise with Morgan Stanley. It closed a successful Series A round in April, raising $34.5 million and taking total capital raised to $90 million.
Find out more about the rise of digital mortgages during COVID-19 in the July edition of The Adviser magazine, out now.
[Related: Neobank launches home loan offerings]