The CEO of online mortgage lender Tic:Toc Home Loans says that no human judgement need enter the equation when it comes to assessing the expenses of a mortgage applicant.
With the first weeks of the banking royal commission now behind us, Tic:Toc founder and CEO Anthony Baum believes it has become clear that there is an opportunity for the mortgage industry to reconsider how customers are assessed for finance.
“One key flaw that’s been exposed is the failure to conduct basic checks and balances on the applicants’ household expenses. This includes instances where judgement on a customer’s borrowing capacity has been handed to a raft of questionable third parties,” the CEO said.
“The truth is, no human judgement need enter the equation when it’s possible to check up to a year of personal expenses at the click of a button. There’s no grey area for the vast majority of cases.
“It really is that simple — and quick. For the exceptions, a combination of digital and human assessment is the most efficient and responsible way to assess a customer. Plus, automated assessment makes the whole approval process far cheaper, and faster, for a bank than the current process.”
Tic:Toc Home Loans is one of a growing number of new entrants aiming to simplify the mortgage process by harnessing digital technologies and online channels.
Unlike some fintech players looking to disrupt the home loan market, Mr Baum has extensive industry experience, having led Bendigo and Adelaide Bank’s third-party business for close to four years.
The threat of digital disruption has increased for brokers in recent years. However, many still believe that face-to-face contact with a mortgage professional will continue to be the preferred choice for Australian borrowers.
“My opinion is home loans are not actually as complicated as the industry makes out,” Mr Baum said. “They are really a means to an end, which is more a utility-style product.
“As the CEO of an online home loan company that bases its work on the latest financial technology, I find it hard to get behind the idea that generic reference points, such as the Household Expenditure Measure, and personal judgement are being used as an integral part of the approval process, especially now we are hearing about the true cost for those on the receiving end of the so-called ‘Liar Loans’.
“The royal commission is looking at historical banking issues. And while it is vitally important we expose nefarious practices to sunlight, my concern is that there will be no industry-wide visionary leadership and legislative framework as an outcome. This is the industry’s opportunity to create a future strategy that leverages the data and technologies available to the benefit of the customer, increases the relevance of Australian financial services globally, and protects everyday Australians in the process.”
Mr Baum believes that the onus is on industry players, banks, technology providers and the government to ensure real change is enacted.
“I may make myself deeply unpopular for saying this, but that needs to include far tighter compliance, regulation and independent oversight,” the CEO said, adding that Tic:Toc would like to see legislation around data capture, storage and usage within an institutional environment.
“Data is the new cash in a banking environment, yet, other than privacy, there’s limited regulation to guard it in the same way as we do a vault. Plenty of companies are doing the right thing, but until there’s a compliance structure in place, many players, large ones included, will continue to flaunt the guidelines for their own gain.”