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While the concept of an ‘Apple home loan’ may seem futuristic at best, such products could become a reality sooner than you think, with major technology giants, including Apple and Google, expected to launch low-cost financial products as soon as the next five years. But what does this mean for brokers?
A recent survey of 5,000 consumers in the US and UK by KAE and Toluna research groups found that 10% of adults – and more than 40% of current Apple users - would consider banking with the company and KAE spokespeople Lee Powney and David Rankin say the fact that Apple has already ‘disrupted’ industries as diverse the music, mobile, computer, application development and publishing sectors - with great success - indicates that the potential for expansion into financial services is a very real possibility.
“There are plenty of opportunities within the categories [Apple] currently competes in…We believe that one overriding lesson from this study is of great relevance for the financial services industry: namely the ability to design and maintain a consistently rewarding consumer experience.”
NAB CEO, Cameron Clyne, for one, seems to agree, telling the Herald Sun it will be crucial for Australia’s banks to maintain consumer trust if and when they face competition from global technology giants – and that local lenders face a potentially brutal battle to retain their market share.
APRA figures show the big four currently control almost 85% of the nation's $1.16 trillion mortgage market and Clyne says the lucrative returns in lending made it a natural target for the technology players.
"All these new entrants will target the higher returns on equity in retail banking - that is where the battleground will be," he says. “They will be playing in all sorts of spaces but it is probably still the providence of the banks to retain depositor relations.”
But FBAA president, Peter White, says that the possibility of tech giants elbowing brokers out of the picture isn’t a pressing concern.
“We can’t speculate on what other international markets are going to do, but here in Australia, we have seen repeatedly that any form of online completion for home loans doesn’t work – there’s always got to be some form of human intervention.”
Online lead-generation and fulfilment programs might work in the US, he says, but Australians have consistently preferred human contact when it comes to their home laon.
“I think that Australia, as far as being able to fulfil online from beginning to end, is probably 10-20 years away and by the time we get there, the broking market will have evolved [to cope]. Today, as far as its impact on broking in Australia, I would say it’s probably going to have next to none.”
Furthermore, says White, it would be financially impractical for an IT company to bother getting a banking license.
“As an IT company, it would be a very expensive venture to go into. I wouldn’t say they couldn’t do it, but I couldn’t understand why they would, especially because they’d be based on American models and American models are very different to what we do here - that’s why we don’t see a lot of them coming here…You need to compare apples to apples.”
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