The non-major banks have been scoring goals over the past year with their speed, strong relationships, and broad offerings delighting brokers and their customers. We review how the non-majors have been breaking into the major leagues.
As the economic environment changes and rates continue to rise, there’s been a massive amount of competition in market for refinancing borrowers. Whether it’s cashback offers, discounts, or speedier turnarounds, lenders have been coming out strongly to gain the advantage with brokers and their clients. But there’s been one clear winner when it comes to broker favour: non-major banks.
In fact, fewer brokers have been using major banks and non-banks for their clients, the November Broker Pulse survey from Momentum Intelligence found. There was a 14 percentage point drop in the proportion of brokers using non-banks and a 12 percentage point drop in those using major banks in the month of October 2022.
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Meanwhile, the non-major banks were the most preferred lender segment by brokers, with over 86 per cent of brokers having used at least one non-major bank every month for the past six months (compared to 75 per cent having used major banks).
The latest survey of 234 brokers — conducted between 1–15 November — revealed 75 per cent of brokers used a non-major bank for product pricing in October, up from 72 per cent in September.
Moreover, a greater proportion of brokers were using non-majors for their turnaround times, with half of all brokers saying this was a driving factor for them sending their clients to the non-majors in October, while only a quarter said the same for majors and non-banks.
Commenting on the results, Momentum Intelligence director, Michael Johnson, said: “The rapidly evolving interest rate environment is testing lenders to evaluate their pricing and positioning in the third-party channel.
“This is likely to impact which lenders brokers are turning to for the best deals and may translate into short-term market share growth for the lenders who hold their rates lower.”
Business development managers (BDMs) and credit assessors at some smaller lenders are also receiving glowing reports, with some of the non-major banks achieving perfect scores from brokers, outshining their larger counterparts.
Indeed, 100 per cent of brokers surveyed gave a positive rating of their experiences with business development managers (BDM) across five of this cohort, including Auswide Bank, Great Southern Bank, Newcastle Permanent, P&N Bank, and ME Bank BDMs also scored a 96 per cent positive rating in October.
Unlike their major bank counterparts (ANZ, CBA, NAB, and Westpac), the non-majors have been able to move nimbly, with their turnaround times, service levels, pricing, and innovation in new products all helping them close ranks on the big four bank stronghold.
For some non-major banks, it has been a consistency of service and speed in credit decisioning that has helped them win share, while for other lenders, it is turnarounds and technology that help attract brokers.
Several non-majors in the mutual banking space have consolidated or merged with fellow customer-owned lenders to help ensure their competitive advantage in this space.
In the last few months alone, shareholders of both Queensland-based Heritage Bank and Adelaide-based People’s Choice Credit Union voted in favour of the merger of the two entities.
Together, this ‘blend’ of mutuals will create a national member-owned banking organisation with 720,000 members, 1,900 employees, $23 billion in assets, and 95 branches across South Australia, Victoria, NSW, Queensland, and the Northern Territory, they explained.
The merged organisation will operate dual head offices in Adelaide and Toowoomba and both organisations have “committed to no non-executive redundancies” as a result of the merger.
There would be no closures of the existing branches as a result of the proposed merger, according to the lenders.
Work is now underway to prepare for the two organisations to come together as a single organisation from 1 March 2023, with “a focus on continuing to meet the needs of members”.
Similarly, members of Greater Bank and Newcastle Permanent voted in favour of merging the two lenders together to form the Newcastle Greater Mutual Group Ltd.
The merger, which will come into effect from 1 March 2023 (should it gain regulatory approvals from the prudential regulator), will create a combined entity with nearly $21 billion in total assets and approximately 600,000 customers.
Both brands will be retained under the merged entity and there will be no change to customer bank accounts or banking details on merging.
New players have also been breaking into the space. Mutual lender RACQ (Royal Automobile Club of Queensland) Bank has now begun working with brokers for the first time since the bank launched in 2017, for example.
The Queensland-based bank started a pilot with individual brokers earlier this year and now is onboarding two aggregator partnerships to broaden its reach.
Speaking to The Adviser, RACQ Bank general executive, Michelle Winzer, explained that the bank was breaking into broker after recognising that nearly 70 per cent of home loan borrowers came through the third-party channel.
RACQ therefore “recognised that there is a whole lot of people out there that RACQ Bank could be helping, but because [it wasn’t] working with the broker channel, [it wasn’t] actually getting the opportunity to.
“So, we worked hard over this last year to get the change in our strategy and actually expand into the broker channel,” RACQ Bank’s general executive, Ms Winzer, said.
Brand-new players have been launching, too, with APRA recognising new non-major banks with banking licences. One such newcomer is International Bank of Australia Pty Limited (IBoA), which became a restricted authorised deposit-taking institution (RADI) earlier this year.
IBoA says it intends to be a “global payments bank, licensed in Australia, which will provide banking and payments services to support the increasing global mobility of capital, commerce and people,” according to its website.
The RADI — owned by digital banking and payments company Novatti Group Limited — is headed by Guy Carvalho (managing director and CEO), a former Australia Post head of business & payments services and a former ANZ business consultant.
With all eyes now on ensuring a good client experience, the non-major banks have a strong proposition in market. But as more flows and deals get sent their way, the question is: can they keep their lead?
