As non-bank lending continues to take share in Australia, traditional banks are launching their counterattack.
"We can't sit still, and we don't sit still. We will continue to invest in our business," Adam Brown, National Australia Bank (NAB) broker distribution executive, told Australian Broker.
Under the watchful eye of regulators, most traditional banks have been forced to tighten their lending criteria. Non-banks and alternative lenders have been quick to move in, hoping to snag market share.
Since the Global Financial Crisis, non-banks — or institutions not authorized to accept deposits — have continued to carve out a larger and larger slice of the market each year. Many market participants estimate non-banks account for roughly 10% of the market. In 2024, non-banks' share in the residential home loan market was 11%, according to the Australian Bureau of Statistics (ABS). That same year, research and advisory firm Foresight Analytics calculated non-bank lending accounted for roughly 16% of Australia's commercial real estate debt.
Where non-banks have the edge is in fewer lending guidelines, which often leads to faster turnaround times and access to credit for borrowers who otherwise couldn't get approved at a bank, such as self-employed people, non-residents and those with less-than-stellar credit scores — albeit with a higher price tag.
But Brown said traditional banks have a few things going for them too.
"The advantage of a traditional bank is [that] you've got more than just the product that you start with," Brown said. "You might start with a home loan. But the opportunity you've got at a traditional bank is one, you've got the branch if you ever need it; you've got your ATMs at each corner. And you've got specialized services around wealth creation, around help, guidance [and] advice.
"If you're investing in business, you might have some business lending and commercial lending opportunities down the track," he said. "It really is a place where you can start a journey and continue your journey through financial security over time. And that's the biggest benefit of banking with a big bank, and what we certainly pride ourselves on at NAB, being able to support those types of customers."
Aside from the big bank's name brand — and plethora of brick-and-mortar locations — Brown said that NAB is continuing to invest in new technology and services as a way to incentivize borrowers and brokers alike to stick with it. The list includes increased investments in the broker channel, AI advancements, new account capabilities and more.
"That's not necessarily to combat or compete against alternative lenders," Brown said. "It's just about how we support a broader range of customers that are looking to bank with NAB.
"We are a great business bank," he said. "We pride ourselves on being a great business bank and great relationship bank."
Below are some of the ways the major bank is moving into the future.
"We continue to invest in the broker channel," Brown said. "We're investing in our simple home loans platform. We're increasing our flow in that, and that's all about bringing in more automation, more tech, to support a broker with their lodgement with that. And then the speed at which we can turn around assessment and get a response to a customer. "
"[We're] experimenting with things like AI, investing in AI and looking at some strategic bets around AI," Brown said. "We're starting slow. But we're looking at it to improve efficiency initially, and that's taking away routine tasks so that we're able to free up time for our people to go and spend more time with customers and more time with brokers."
"We're looking at our propositions, and [asking], how is it that we create better propositions that attract more customers? Some examples of that [are], we've just launched multiple offset [accounts], which is, customers can set up to 10 offset accounts to their home loan for no extra cost. And that just [creates] a way for a customer to go and put all their extra dollars into working for them against their loan, to reduce interest. And there's lots of customers that are wanting to look to bucket money these days — which is, you've got a holiday account, they've got a school fees account, they've got a general expense account — and so we're really pleased that we've been able to bring that to market. And then the benefit from the customers is they've got every dollar working for them to offset interest."
"[NAB] is expanding our offering around LMI waivers — lenders mortgage insurance — waiving that for certain sectors. We've expanded our sectors into the accountant space and into the legal profession, with solicitors and barristers, as well as what we've always had in and around our health professionals, and expanding that as well. So we look at some of those professional services-type customers and go, how do we attract more and support more of that type of customer? And that's why we've tweaked our LMI waiver policy around that."
"Supporting self-employed customers is something that we are very good at, very passionate about. So we updated our policies. We updated our policies in and around that earlier in the year. We accept a true one-year tax return for self-employed customers, or one-year of financials supported by tax returns. That helps our self-employed customers. And we all know that there's a lot of self-employed customers in Australia."
