Brokers are becoming the main players in the personal loan space, according to one of the CEO of one of the biggest fintech lenders in the sector.
Daniel Foggo, CEO of Plenti, told Australian Broker that the personal loan market has been radically altered by the broker channel, resulting in record growth at lenders such as his.
“Of all of our originations, the broker channel represented over 60%,” said Foggo. “And it was the channel that grew most strongly over the period.”
“For personal loans, the broker channel is now the most important channel for us. When we originally started as a business, we were predominantly focussed on digital channels, and we have now made the switch because brokers are the largest part of our personal loan originations.”
“Our relationships with brokers are immensely important, particularly with mortgage and auto brokers, but all brokers in general.”
“The part of our business that has grown most strongly is automotive lending, which is up over 300% year on year. Clearly, that’s driven almost entirely by the broker channel.”
The personal loan space has increasingly been disrupted by the broker channel and the Buy Now, Pay Later (BNPL) space. As more money comes in and goes out at the top end, brokers are on hand to assist clients, while at the lower end, BNPL is providing a solution.
“Brokers are more familiar with using personal loans, because fintech businesses like our have helped drive the adoption of personal loans for brokers as they have sought to diversify their income,” said Foggo. “They’re much more aware of circumstances where a personal loan might make much more sense, such as extending a mortgage or alternative financing.”
There is a link between mortgage brokers and personal loans: if a client goes to a different broker for their personal loan, then there is always the chance that their personal loan broker could poach their business by offering to refinance their home loan.
“Offering personal loans is a good way for a broker to protect their existing customer base and also expand their revenue,” explained Daniel Foggo. “Brokers are realising that when people who are applying for a mortgage, it might make sense and be easier to get an approval if they consolidate their debts into a lower rate personal loan.”
“What has happened in the last year is that personal loan rates have come down quite substantially, so you now see offers at 5% or 6%, which is quite a lot different to where we were three or four years ago, when they were closer to 10%.”
“I think we’ve become more relevant for brokers where they are meeting Responsible Lending Obligations when they are helping their customers get a mortgage, but now are also more comfortable offering these loans, they’re speaking with their clients and figuring out when a personal loan might make sense.”
