How uncertainty helps non-banks seize
the moment
Non-bank lenders are stepping up, providing adaptable financial solutions and thriving where traditional banks hesitate, offering a lifeline to brokers and borrowers navigating a challenging market
More
THE PLAY Waiting for Godot, in which the eponymous Godot never arrives, struck a chord with audiences partly because it was written soon after the massive dislocations of World War 2 when people were understandably contemplating the uncertain nature of human existence.
As 2024 enters the home stretch, it seems clear that one of the year’s major broking themes has been a kind of financial equivalent – let’s call it waiting for rate cuts.
Australian businesses and mortgage holders have faced massive dislocation in the post-COVID hangover, and many may feel like lower interest rates are still excruciatingly beyond reach – or may arrive too late. Like Samuel Beckett’s play, the narrative for many lenders and brokers is all about mulling options and biding time while dealing with a lack of impetus.
Amid this climate of uncertainty, Australia’s non-bank lenders are experiencing a renaissance. These agile institutions, once considered fringe players in the lending market, are stepping into the spotlight as they fill crucial gaps left by traditional banks – offering a foothold for those in limbo.
As traditional lenders become more risk-averse and rely heavily on automated systems, they inadvertently create opportunities for more flexible competitors. This shift has been particularly noticeable in certain lending areas.
“Over the last 18 months, our most significant success has been concentrated in the alternative documentation [alt doc], SMSF and commercial lending sectors,” says Paul Bakker, national manager for sales and strategic partnership at Better Choice Home Loans.
Bakker explains that this focus on non-traditional lending has been a strategic move for Better Choice. “By transitioning away from prime or traditional loans, we’ve carved out a niche for ourselves in addressing the needs of a diverse group of borrowers and business owners who are often underserved by traditional lenders,” he says.
This trend reflects a broader shift in the lending landscape, where non-banks are increasingly filling the gaps left by traditional banks. Belinda Wright, head of partnerships and distribution at Thinktank, adds, “We’ve observed heightened competition in alternate income verification lending, driven by an increased number of lenders operating in the space, both traditional banks and non-bank financial institutions. This competition has been further fuelled by banks adopting more accommodating lending policies, making the landscape more dynamic but also challenging.”
As the financial landscape continues to evolve, non-banks are not resting on their laurels. Many are actively expanding their product offerings to cater to a wider range of customer needs and insulate themselves from market volatility.
Smith emphasises the importance of this strategy: “Whichever asset class, whether it’s home, car, commercial, business or SMSFs, brokers know that with Liberty, they can expect fast turnaround times, clear communication and a team that will work closely with them on scenarios of all kinds to find a way to ‘yes’.”
By diversifying into areas such as commercial loans, SMSF lending, asset finance and cash flow solutions, non-banks are positioning themselves as one-stop shops for a broad spectrum of financial needs. This approach not only strengthens their market position but also helps deepen relationships with brokers and customers alike.
Bannister highlights a specific area of growth: “La Trobe Financial offers an appealing ‘set and forget’ commercial product, particularly as our maximum loan size [of $25 million*] means we are one of a few non-bank lenders able to stretch to assist blue-chip commercial property owners while also maintaining convenience for the borrower.”
While flexibility is crucial, non-banks are also leveraging technology to enhance their competitive edge. Advanced data analytics and automated processes are enabling these lenders to make faster, more informed decisions without sacrificing the human touch that sets them apart.
“At La Trobe Financial, ensuring personal interaction remains fundamental,” Bannister says. “Thus, we’re expanding our teams to keep up with the growing need for our loan offerings. Technologically, we are committed to refining our backend systems to enhance data accuracy and speed up service times, aiming to facilitate seamless cooperation within our broker networks.”
This blend of technological efficiency and personalised service is proving a winning formula. It allows non-banks to compete with the processing speed of larger institutions while maintaining the flexibility and customer-centric approach that’s become their hallmark.
La Trobe Financial is Australia’s leading alternative asset manager and a proven and trusted investment partner for institutional and retail investors with c. A$20billion in assets under management. Operating Australia’s largest retail credit fund, La Trobe Financial has the most diversified funding program of all non-bank lenders operating in Australia. Since 1952, La Trobe Financial has been driven to help people realise their potential with specialist financing and investment solutions.
Find out more
Better Choice Home Loans offers a range of home loan solutions. Since 2018 we have been a part of the BNK Banking Group, giving us all the benefits of a bank, including sharper pricing, broader policies, diverse features and direct credit approval with a common-sense approach. Our Commercial and Residential Alt Doc products are designed to help a range of borrowers, including those purchasing their own home or an investment property, SME commercial borrowers, or those borrowers who struggle to meet traditional lending criteria and need more specialised solutions. These products are offered exclusively to customers via brokers accredited with Better Choice.
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In Partnership with
In the current economic climate, an intriguing phenomenon has emerged: seasoned borrowers with robust financial statements increasingly find themselves unable to pass certain technical assessments required by major banks. This has compelled many to explore alternatives to traditional banking, much to the benefit of non-bank lenders.
“The bias to automated lending assessments adopted by major banks has created a gap, especially for self-employed borrowers, SMSFs, borrowers new to Australia, property developers, to name a few, which non-bank financial institutions like La Trobe Financial are increasingly filling,” says Cory Bannister, chief lending officer at La Trobe Financial.
Cory Bannister
La Trobe Financial
Industry experts
Cory Bannister is a senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel and the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1 billion. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools, and has had conduct of the relationships with substantial wholesale and retail investors, with responsibility for overseeing related reporting.
La Trobe Financial
Cory Bannister
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Paul Bakker
Better Choice Home Loans
David Smith
Liberty
Industry experts
With close to 30 years of experience in the financial services industry, Paul Bakker brings a wealth of knowledge and expertise to his role of national manager for sales and strategic partnership at Better Choice. He is responsible for leading the sales team and driving business growth across Australia. Prior to working at Better Choice, Bakker was the national manager strategic partnerships at Westpac. Under his leadership, the third party team reached record volumes, attaining #1 market share, and Westpac was named Australia’s Best Major Bank for Broker every year from 2015 to 2018.
Better Choice Home Loans
Paul Bakker
Cory Bannister is a senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel and the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1 billion. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools, and has had conduct of the relationships with substantial wholesale and retail investors, with responsibility for overseeing related reporting.
La Trobe Financial
Cory Bannister
Bakker echoes this sentiment, emphasising the importance of customised solutions. “We recognised the potential in serving those who don’t meet the strict lending criteria of traditional financial institutions,” he says, “and by tailoring our lending solutions to be more inclusive, we’ve opened doors for self-employed individuals, entrepreneurs and small to medium-sized enterprises that typically struggle with the rigid documentation requirements of standard loans.”
David Smith, Liberty’s chief distribution officer, further reinforces this point: “Liberty was founded on the values of financial inclusion – and our ability to understand each borrower’s unique circumstances to help them gain access to funds has always set us apart. This is not new for Liberty: our flexibility and adaptability allow us to help brokers find solutions for customers who may be challenged in the current economic environment.”
“By tailoring our lending solutions to be more inclusive, we’ve opened doors for self-employed individuals, entrepreneurs and small to medium-sized enterprises that typically struggle with the rigid documentation requirements of standard loans”
Paul Bakker,
Better Choice Home Loans
The ability to adapt quickly to market conditions and individual borrower needs is a secret weapon of non-banks. Unlike their larger counterparts, these institutions can tailor their approach to each unique situation, often resulting in more favourable outcomes for borrowers who don't fit the conventional mould.
“Non-banks are distinguished by their recognised ability to be generally more nimble and agile than traditional lenders. This flexibility allows them to workshop transactions and quickly adapt to meet market demands,” Wright explains. “In today’s fast-paced economic environment, where borrowers require swift and responsive lending solutions, this agility is a crucial advantage.”
This agility is particularly valuable as economic conditions vary across different regions. Wright says, “Varying economic cycles across different states have created diverse demands for a wide range of products. This regional variation underscores the importance of being able to offer tailored lending solutions that can respond to the individual needs and market conditions of each state.”
Wright adds, “Advancements in technology are supporting quicker loan turnaround times through improved credit-decisioning tools. By leveraging data analytics and automated processes, non-banks can make faster, more informed lending decisions. Importantly, these technological tools still allow for the flexibility to incorporate judgement-based decisions, ensuring that the human element remains a vital part of the lending process.”
Bakker emphasises the role of innovation in non-bank lending. “Innovation is a key differentiator. Non-banks are not constrained by the same legacy systems and regulatory frameworks as traditional banks, enabling them to leverage the latest technologies and develop creative lending products,” he explains. This technological edge allows non-banks to offer more tailored solutions that better meet the needs of modern borrowers, such as gig workers or small businesses with non-traditional income streams.
With close to 30 years of experience in the financial services industry, Paul Bakker brings a wealth of knowledge and expertise to his role of national manager for sales and strategic partnership at Better Choice. He is responsible for leading the sales team and driving business growth across Australia. Prior to working at Better Choice, Bakker was the national manager strategic partnerships at Westpac. Under his leadership, the third party team reached record volumes, attaining #1 market share, and Westpac was named Australia’s Best Major Bank for Broker every year from 2015 to 2018.
Better Choice Home Loans
Paul Bakker
Cory Bannister is a senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel and the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1 billion. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools, and has had conduct of the relationships with substantial wholesale and retail investors, with responsibility for overseeing related reporting.
La Trobe Financial
Cory Bannister
Paul Bakker
Better Choice Home Loans
With close to 30 years of experience in the financial services industry, Paul Bakker brings a wealth of knowledge and expertise to his role of national manager for sales and strategic partnership at Better Choice. He is responsible for leading the sales team and driving business growth across Australia. Prior to working at Better Choice, Bakker was the national manager strategic partnerships at Westpac. Under his leadership, the third party team reached record volumes, attaining #1 market share, and Westpac was named Australia’s Best Major Bank for Broker every year from 2015 to 2018.
Better Choice Home Loans
Paul Bakker
“We’ve observed heightened competition in alternate income verification lending, driven by an increased number of lenders operating in the space, both traditional banks and non-bank financial institutions”
Belinda Wright, Thinktank
The rise of the alternatives
Flexibility: the non-bank superpower
Published 16 Sep 2024
Cory Bannister
La Trobe Financial
Belinda Wright
Thinktank
David Smith was appointed as Liberty’s chief distribution officer in January 2024. Strategy-driven with a customer-first ethos, Smith is responsible for the broader distribution platforms of the Liberty Financial Group, including its business partner relationships. He brings a wealth of knowledge and expertise, having spent over 20 years in the financial services sector. Smith holds a Bachelor of Business (Hons) from Brunel University London and a Postgraduate Diploma of Marketing from the UK Chartered Institute of Marketing.
Liberty
David Smith
Belinda Wright is head of partnerships and distribution at Thinktank. With over 20 years’ experience across various divisions in banking and financial services, she specialises in residential sales, credit and end-to-end home loan processing with a focus on third party broker channel experience. She also has experience in marketing, commercial and institutional banking. Prior to working at Thinktank, Wright held roles at Westpac Group, ANZ and RAMS.
Thinktank
Belinda Wright
As a leading Australian non-bank lender, Liberty offers innovative solutions to support customers with greater choice. Over the past 26 years, this free-thinking approach to loan solutions has seen more than 850,000 customers get financial across a wide range of home, car, personal and business loans, as well as SMSF lending and insurance products. Liberty remains the only non-bank lender with an investment-grade credit rating offering custom and prime solutions to help more people get financial.
Find out more
David Smith, Liberty
“Tapping into opportunities beyond home loans should be a focus for brokers who wish to reach their full potential and grow their business. Diversification keeps brokers relevant regardless of economic conditions”
More brokers are citing client circumstances as the primary reason for submitting loan applications to non-banks as the economy remains weak. A recent Broker Pulse survey from Agile Market Intelligence showed that brokers have increasingly been turning to the non-banks for their broader credit policies and range of products, with many saying the segment has been serving borrowers who require specialist loans and struggle to secure financing with mainstream banks.
The survey showed that a record 87% of brokers cited client circumstances as their primary reason for submitting applications to a non-bank lender in June 2024 – beating previous record highs of 83% in May and 81% in April.
Despite their growing success, non-banks are not immune to the challenges posed by the current economic climate. Funding costs have been volatile, and competition within the sector has intensified as more players enter the market.
Wright acknowledges these hurdles: “With global economic uncertainty and persisting inflationary pressures, funding costs for non-banks have been volatile. Unlike traditional banks, non-banks don’t have access to deposits, making them more susceptible to shifts in the cost of, and access to, capital.”
However, these challenges have also spurred innovation within the sector. Non-banks are continually refining their offerings and exploring new niches to maintain their competitive edge. The ability to quickly pivot and adapt to changing market conditions remains one of their greatest strengths. The rise of private funding has also fuelled expansion of non-traditional finance.
Smith adds, “While the current environment has its challenges, Liberty has long promoted the benefits of diversification to help [protect] brokers from uncertainty. Tapping into opportunities beyond home loans should be a focus for brokers who wish to reach their full potential and grow their business. Diversification keeps brokers relevant regardless of economic conditions, enabling them to meet the needs of more customers.”
The tech advantage at non-banks
Brokers serve as a vital link between non-banks and potential borrowers, often steering clients towards non-bank solutions when circumstances suit.
"Many brokers prefer to be able to offer a range of solutions to their clients, as this typically leads to stronger and deeper relationships, new advocates and potential new revenue streams,” Wright explains. “Often what brokers are looking for to help them achieve this is a true partnership, a collaboration with knowledgeable and highly experienced relationship managers who can help them to evaluate the potential for success of any given lending scenario and then convert it into a settlement with full upfront and trail commissions.”
This symbiotic relationship benefits both parties, with brokers able to provide more comprehensive services to their clients, and non-banks gaining access to a broader customer base. Bannister adds, “We know that word-of-mouth referral is the biggest contributor to a broker’s business growth, and what better way to build your business than by offering more solutions to more customers in a more tailored way?”
Bakker notes that broker expectations have evolved in recent years. “In the current market, brokers expect non-banks to offer flexible, innovative lending solutions that can adapt to volatile economic conditions. They need quick, reliable service and products that cater to a diverse clientele, especially those underserved by traditional banks,” he says.
He further elaborates on this shift in priorities: “Compared to previous years, there’s a heightened demand for non-banks to fill gaps left by major banks retreating from the market, with an emphasis on alt-doc loans and SMSF. Brokers now prioritise non-banks that can provide competitive rates, streamlined processes, and support for complex borrowing scenarios, reflecting a shift towards more bespoke, customer-centric approaches in lending practices.”
As the financial services landscape continues to evolve, non-banks are poised to play an increasingly significant role. Their ability to combine technological innovation with personalised service and flexible lending criteria positions them well to meet the diverse needs of modern borrowers.
Smith encapsulates this forward-looking perspective: “To keep up with the expectations of customers, non-banks need to embrace the efficiencies and opportunities that innovation can bring. Those non-banks who take a free-thinking and flexible approach to each deal, like Liberty, are going to be able to meet the needs of more customers across various markets.”
Bannister outlines his company’s strategic focus: “At La Trobe Financial, we identify macro themes that present opportunities and set about developing products that address these themes in a creative and customer-centric way. By focusing on these areas, we enhance our service offerings and better meet the evolving demands of our markets.”
Bakker suggests that non-banks should continue to innovate and explore new lending areas. “Looking ahead, non-banks should continue to focus on strategic improvements and innovations that allow us to serve various markets more effectively,” he explains. “A key area of opportunity lies in servicing more niche areas of lending that larger institutions often overlook or choose not to serve.”
He expands on potential new markets: “These niches could include loans for environmentally sustainable projects, specialised industries, or emerging sectors that require a deep understanding of their unique risks and potential.”
Wright adds a final thought on the future direction of non-banks. “Non-banks should also focus on increasing their collective market share,” she says. “This might involve expanding their presence in underserved markets, refining product offerings to better meet evolving customer demands, and further leveraging technology to improve efficiency and customer experience.”
Diversification: the key to resilience
Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance up to $8 million and residential-property mortgage finance up to $2 million in the Australian self-employed, PAYG and SME sectors. Since 2006, Thinktank has provided over $11 billion worth of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, including Full Doc, Mid Doc (alternative income verification), Quick Doc, SMSF loans and private lending.
Find out more
As traditional banks grapple with regulatory pressures and legacy systems, non-banks are redefining the boundaries of lending one customised solution at a time. As they navigate turbulent economic waters, adaptability among both lenders and brokers will be key.
Much like the characters in Waiting for Godot, brokers must learn to adjust to the uncertainty, finding opportunities and meaning in the present while the promise of rate cuts beckons on the horizon. Those who can align strategies with emerging trends and leverage the support of knowledgeable professionals stand the best chance of success.
Customisation is a hallmark of non-bank lending. Lenders like Aquamore structure their deals to meet the specific needs of different clients, offering a range of product types based on assessment criteria, documentation requirements and loan tenure.
“Aquamore’s deal structure is fully drawn in advance and split into five different product types,” says Porch. “This approach allows all sectors of the market to be served with aligned solutions.”
Such tailored solutions are particularly attractive to SMEs looking to purchase commercial property as part of their self-managed super fund strategy, aligning with their long-term financial goals.
Bannister emphasises La Trobe Financial’s broad product suite and ability to tailor each product to a borrower’s specific requirements. He highlights its specialised commercial lending products, such as Lease Doc, Residual Stock and Development Finance loans.
“We find an increasing number of brokers turning to us for assistance for ‘set and forget’ commercial property loans, particularly as our maximum loan size – of up to $25 million – and no annual reviews on loans means we are one of a few non-bank lenders able to stretch to assist blue-chip commercial property owners,” says Bannister.
Koutsoumidis explains Equity-One’s approach to product tailoring: “We have refined our loan product to suit most of the enquiry we have received over our 30 years’ experience. Borrowers need an option when their bank cannot accommodate their borrowing requirements, or they cannot do it in a timely manner.”
Emphasising the simplicity and flexibility of the non-bank’s offerings, he says, “We keep things ‘deliberately simple’. Our loans are interest-only payments for fixed terms of a year or two. They can be repaid anytime with no break costs and no clawbacks to brokers. We need to be quick and reliable. This is what we try to focus on.”
Economic headwinds and tailwinds
David Smith was appointed as Liberty’s chief distribution officer in January 2024. Strategy-driven with a customer-first ethos, Smith is responsible for the broader distribution platforms of the Liberty Financial Group, including its business partner relationships. He brings a wealth of knowledge and expertise, having spent over 20 years in the financial services sector. Smith holds a Bachelor of Business (Hons) from Brunel University London and a Postgraduate Diploma of Marketing from the UK Chartered Institute of Marketing.
Liberty
David Smith
Belinda Wright is head of partnerships and distribution at Thinktank. With over 20 years’ experience across various divisions in banking and financial services, she specialises in residential sales, credit and end-to-end home loan processing with a focus on third party broker channel experience. She also has experience in marketing, commercial and institutional banking. Prior to working at Thinktank, Wright held roles at Westpac Group, ANZ and RAMS.
Thinktank
Belinda Wright
David Smith
Liberty
Belinda Wright
Thinktank
David Smith was appointed as Liberty’s chief distribution officer in January 2024. Strategy-driven with a customer-first ethos, Smith is responsible for the broader distribution platforms of the Liberty Financial Group, including its business partner relationships. He brings a wealth of knowledge and expertise, having spent over 20 years in the financial services sector. Smith holds a Bachelor of Business (Hons) from Brunel University London and a Postgraduate Diploma of Marketing from the UK Chartered Institute of Marketing.
Liberty
David Smith
Belinda Wright is head of partnerships and distribution at Thinktank. With over 20 years’ experience across various divisions in banking and financial services, she specialises in residential sales, credit and end-to-end home loan processing with a focus on third party broker channel experience. She also has experience in marketing, commercial and institutional banking. Prior to working at Thinktank, Wright held roles at Westpac Group, ANZ and RAMS.
Thinktank
Belinda Wright
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The broker connection
Mortgage brokers have a pivotal role in supporting commercial borrowers in the current market. By broadening their scope and viewing themselves as finance brokers, they can better address the comprehensive needs of their clients.
“It’s also wise to be confident in a lender, based on their track record, market reputation and funding lines,” advises Porch.
Understanding the full financial picture of clients and collaborating with commercial finance specialists can help brokers identify and capitalise on all potential opportunities, enhancing their service offerings and boosting client satisfaction.
“We know that word-of-mouth referral is the biggest contributor to a broker’s business growth, and what better way to build your business than by offering more solutions to more customers in a more tailored way?”
Cory Bannister,
La Trobe Financial
A customer-centric focus to expand market share
Fazlic adds, “Aggregator customer relationship management systems are essential tools for brokers in today’s complex and diversified financial landscape.” He emphasises the importance of technology, compliance support and ongoing education in empowering brokers to meet their clients’ needs effectively.
Koutsoumidis highlights the value that brokers bring to the commercial lending process.
“We see brokers add a lot of value to their customers, particularly in the commercial space,” he says. “Having a case of reliable, good lenders on your short-dial list is important. Once you have a small number of good lenders, a broker will be able to service most of the borrower’s expectations.”
Varying turnaround times by lender type in Australia
Source: Agile Market Intelligence Broker Pulse survey
Mild growth/contraction = <5% on six-month-ended annualised basis
Medium growth/contraction = 5–20% on six-month-ended annualised basis
Strong growth/contraction = >20% on six-month-ended annualised basis
Mar 2024
Oct 2023
Apr 2023
Oct 2022
Apr 2022
8 days
Smaller authorised deposit-taking institutions (ADIs)
Average time to credit decision in May 2024
Average time to credit decision in June 2024
Medium growth
Strong growth
5.6 days
Mild contraction
Mild contraction
Medium growth
Medium growth
Medium growth
Strong growth
Medium growth
Strong growth
Source: Reserve Bank of Australia Financial Stability Review, March 2024
SME expectations for Australian economy over next 3 months
Non-banks’ market share by borrower segment, Jan 2024
60
50
40
30
Stronger
Same
Weaker
20
10
Jan 24
Feb 24
13%
38%
49%
46%
17%
37%
Mar 24
42%
43%
15%
Apr 24
38%
48%
14%
May 24
39%
47%
14%
Jun 24
36%
56%
9%
Supporting commercial borrowers
To be sure, borrowers in the current market face no shortage of challenges, including serviceability issues, the increased cost of living and the withdrawal of some lending products. But brokers who use the suite of tools available at non-banks will nearly always be able to find a solution to a borrower’s needs, whether commercial or otherwise.
For those new to commercial broking, finding the right support is crucial. Fazlic states, “As any commercial broker will tell you, the first step into the industry is by far the hardest. There are a lot of unknowns, which means finding a trusted aggregator partner is critical. It can often mean the difference between success and failure.”
Business lending trends: Banks vs non-banks
Industry experts
4 days
3.8 days
Larger authorised deposit-taking institutions (ADIs)
5 days
4.4 days
Non-banks
*Terms, conditions, fees, charges and La Trobe Financial lending criteria apply
~5%
Housing credit
~10%
Business credit
In Partnership with
Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance up to $8 million and residential-property mortgage finance up to $2 million in the Australian self-employed, PAYG and SME sectors. Since 2006, Thinktank has provided over $11 billion worth of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, including Full Doc, Mid Doc (alternative income verification), Quick Doc, SMSF loans and private lending.
Find out more
As traditional banks grapple with regulatory pressures and legacy systems, non-banks are redefining the boundaries of lending one customised solution at a time. As they navigate turbulent economic waters, adaptability among both lenders and brokers will be key.
Much like the characters in Waiting for Godot, brokers must learn to adjust to the uncertainty, finding opportunities and meaning in the present while the promise of rate cuts beckons on the horizon. Those who can align strategies with emerging trends and leverage the support of knowledgeable professionals stand the best chance of success.
Source: Reserve Bank of Australia Financial Stability Review, March 2024
Non-banks’ market share by borrower segment, Jan 2024
Bannister outlines his company’s strategic focus: “At La Trobe Financial, we identify macro themes that present opportunities and set about developing products that address these themes in a creative and customer-centric way. By focusing on these areas, we enhance our service offerings and better meet the evolving demands of our markets.”
Bakker suggests that non-banks should continue to innovate and explore new lending areas. “Looking ahead, non-banks should continue to focus on strategic improvements and innovations that allow us to serve various markets more effectively,” he explains. “A key area of opportunity lies in servicing more niche areas of lending that larger institutions often overlook or choose not to serve.”
He expands on potential new markets: “These niches could include loans for environmentally sustainable projects, specialised industries, or emerging sectors that require a deep understanding of their unique risks and potential.”
Wright adds a final thought on the future direction of non-banks. “Non-banks should also focus on increasing their collective market share,” she says. “This might involve expanding their presence in underserved markets, refining product offerings to better meet evolving customer demands, and further leveraging technology to improve efficiency and customer experience.”
As the financial services landscape continues to evolve, non-banks are poised to play an increasingly significant role. Their ability to combine technological innovation with personalised service and flexible lending criteria positions them well to meet the diverse needs of modern borrowers.
Smith encapsulates this forward-looking perspective: “To keep up with the expectations of customers, non-banks need to embrace the efficiencies and opportunities that innovation can bring. Those non-banks who take a free-thinking and flexible approach to each deal, like Liberty, are going to be able to meet the needs of more customers across various markets.”
A customer-centric focus to expand market share
“We know that word-of-mouth referral is the biggest contributor to a broker’s business growth, and what better way to build your business than by offering more solutions to more customers in a more tailored way?”
Cory Bannister,
La Trobe Financial
Brokers serve as a vital link between non-banks and potential borrowers, often steering clients towards non-bank solutions when circumstances suit.
"Many brokers prefer to be able to offer a range of solutions to their clients, as this typically leads to stronger and deeper relationships, new advocates and potential new revenue streams,” Wright explains. “Often what brokers are looking for to help them achieve this is a true partnership, a collaboration with knowledgeable and highly experienced relationship managers who can help them to evaluate the potential for success of any given lending scenario and then convert it into a settlement with full upfront and trail commissions.”
This symbiotic relationship benefits both parties, with brokers able to provide more comprehensive services to their clients, and non-banks gaining access to a broader customer base. Bannister adds, “We know that word-of-mouth referral is the biggest contributor to a broker’s business growth, and what better way to build your business than by offering more solutions to more customers in a more tailored way?”
Bakker notes that broker expectations have evolved in recent years. “In the current market, brokers expect non-banks to offer flexible, innovative lending solutions that can adapt to volatile economic conditions. They need quick, reliable service and products that cater to a diverse clientele, especially those underserved by traditional banks,” he says.
He further elaborates on this shift in priorities: “Compared to previous years, there’s a heightened demand for non-banks to fill gaps left by major banks retreating from the market, with an emphasis on alt-doc loans and SMSF. Brokers now prioritise non-banks that can provide competitive rates, streamlined processes, and support for complex borrowing scenarios, reflecting a shift towards more bespoke, customer-centric approaches in lending practices.”
The broker connection
Better Choice Home Loans offers a range of home loan solutions. Since 2018 we have been a part of the BNK Banking Group, giving us all the benefits of a bank, including sharper pricing, broader policies, diverse features and direct credit approval with a common-sense approach. Our Commercial and Residential Alt Doc products are designed to help a range of borrowers, including those purchasing their own home or an investment property, SME commercial borrowers, or those borrowers who struggle to meet traditional lending criteria and need more specialised solutions. These products are offered exclusively to customers via brokers accredited with Better Choice.
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Despite their growing success, non-banks are not immune to the challenges posed by the current economic climate. Funding costs have been volatile, and competition within the sector has intensified as more players enter the market.
Wright acknowledges these hurdles: “With global economic uncertainty and persisting inflationary pressures, funding costs for non-banks have been volatile. Unlike traditional banks, non-banks don’t have access to deposits, making them more susceptible to shifts in the cost of, and access to, capital.”
However, these challenges have also spurred innovation within the sector. Non-banks are continually refining their offerings and exploring new niches to maintain their competitive edge. The ability to quickly pivot and adapt to changing market conditions remains one of their greatest strengths. The rise of private funding has also fuelled expansion of non-traditional finance.
Smith adds, “While the current environment has its challenges, Liberty has long promoted the benefits of diversification to help [protect] brokers from uncertainty. Tapping into opportunities beyond home loans should be a focus for brokers who wish to reach their full potential and grow their business. Diversification keeps brokers relevant regardless of economic conditions, enabling them to meet the needs of more customers.”
More brokers are citing client circumstances as the primary reason for submitting loan applications to non-banks as the economy remains weak. A recent Broker Pulse survey from Agile Market Intelligence showed that brokers have increasingly been turning to the non-banks for their broader credit policies and range of products, with many saying the segment has been serving borrowers who require specialist loans and struggle to secure financing with mainstream banks.
The survey showed that a record 87% of brokers cited client circumstances as their primary reason for submitting applications to a non-bank lender in June 2024 – beating previous record highs of 83% in May and 81% in April.
Economic headwinds and tailwinds
“Tapping into opportunities beyond home loans should be a focus for brokers who wish to reach their full potential and grow their business. Diversification keeps brokers relevant regardless of economic conditions”
David Smith, Liberty
As the financial landscape continues to evolve, non-banks are not resting on their laurels. Many are actively expanding their product offerings to cater to a wider range of customer needs and insulate themselves from market volatility.
Smith emphasises the importance of this strategy: “Whichever asset class, whether it’s home, car, commercial, business or SMSFs, brokers know that with Liberty, they can expect fast turnaround times, clear communication and a team that will work closely with them on scenarios of all kinds to find a way to ‘yes’.”
By diversifying into areas such as commercial loans, SMSF lending, asset finance and cash flow solutions, non-banks are positioning themselves as one-stop shops for a broad spectrum of financial needs. This approach not only strengthens their market position but also helps deepen relationships with brokers and customers alike.
Bannister highlights a specific area of growth: “La Trobe Financial offers an appealing ‘set and forget’ commercial product, particularly as our maximum loan size [of $25 million*] means we are one of a few non-bank lenders able to stretch to assist blue-chip commercial property owners while also maintaining convenience for the borrower.”
*Terms, conditions, fees, charges and La Trobe Financial lending criteria apply
Diversification: the key to resilience
Wright adds, “Advancements in technology are supporting quicker loan turnaround times through improved credit-decisioning tools. By leveraging data analytics and automated processes, non-banks can make faster, more informed lending decisions. Importantly, these technological tools still allow for the flexibility to incorporate judgement-based decisions, ensuring that the human element remains a vital part of the lending process.”
Bakker emphasises the role of innovation in non-bank lending. “Innovation is a key differentiator. Non-banks are not constrained by the same legacy systems and regulatory frameworks as traditional banks, enabling them to leverage the latest technologies and develop creative lending products,” he explains. This technological edge allows non-banks to offer more tailored solutions that better meet the needs of modern borrowers, such as gig workers or small businesses with non-traditional income streams.
Source: Agile Market Intelligence Broker Pulse survey
8 days
5.6 days
Smaller authorised deposit-taking institutions (ADIs)
Average time to credit decision in June 2024
Average time to credit decision in May 2024
Varying turnaround times by lender type in Australia
This blend of technological efficiency and personalised service is proving a winning formula. It allows non-banks to compete with the processing speed of larger institutions while maintaining the flexibility and customer-centric approach that’s become their hallmark.
While flexibility is crucial, non-banks are also leveraging technology to enhance their competitive edge. Advanced data analytics and automated processes are enabling these lenders to make faster, more informed decisions without sacrificing the human touch that sets them apart.
“At La Trobe Financial, ensuring personal interaction remains fundamental,” Bannister says. “Thus, we’re expanding our teams to keep up with the growing need for our loan offerings. Technologically, we are committed to refining our backend systems to enhance data accuracy and speed up service times, aiming to facilitate seamless cooperation within our broker networks.”
The tech advantage at non-banks
“By tailoring our lending solutions to be more inclusive, we’ve opened doors for self-employed individuals, entrepreneurs and small to medium-sized enterprises that typically struggle with the rigid documentation requirements of standard loans”
Paul Bakker,
Better Choice Home Loans
Bakker echoes this sentiment, emphasising the importance of customised solutions. “We recognised the potential in serving those who don’t meet the strict lending criteria of traditional financial institutions,” he says, “and by tailoring our lending solutions to be more inclusive, we’ve opened doors for self-employed individuals, entrepreneurs and small to medium-sized enterprises that typically struggle with the rigid documentation requirements of standard loans.”
David Smith, Liberty’s chief distribution officer, further reinforces this point: “Liberty was founded on the values of financial inclusion – and our ability to understand each borrower’s unique circumstances to help them gain access to funds has always set us apart. This is not new for Liberty: our flexibility and adaptability allow us to help brokers find solutions for customers who may be challenged in the current economic environment.”
As a leading Australian non-bank lender, Liberty offers innovative solutions to support customers with greater choice. Over the past 26 years, this free-thinking approach to loan solutions has seen more than 850,000 customers get financial across a wide range of home, car, personal and business loans, as well as SMSF lending and insurance products. Liberty remains the only non-bank lender with an investment-grade credit rating offering custom and prime solutions to help more people get financial.
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The ability to adapt quickly to market conditions and individual borrower needs is a secret weapon of non-banks. Unlike their larger counterparts, these institutions can tailor their approach to each unique situation, often resulting in more favourable outcomes for borrowers who don't fit the conventional mould.
“Non-banks are distinguished by their recognised ability to be generally more nimble and agile than traditional lenders. This flexibility allows them to workshop transactions and quickly adapt to meet market demands,” Wright explains. “In today’s fast-paced economic environment, where borrowers require swift and responsive lending solutions, this agility is a crucial advantage.”
This agility is particularly valuable as economic conditions vary across different regions. Wright says, “Varying economic cycles across different states have created diverse demands for a wide range of products. This regional variation underscores the importance of being able to offer tailored lending solutions that can respond to the individual needs and market conditions of each state.”
Flexibility: the non-bank superpower
As traditional lenders become more risk-averse and rely heavily on automated systems, they inadvertently create opportunities for more flexible competitors. This shift has been particularly noticeable in certain lending areas.
“Over the last 18 months, our most significant success has been concentrated in the alternative documentation [alt doc], SMSF and commercial lending sectors,” says Paul Bakker, national manager for sales and strategic partnership at Better Choice Home Loans.
Bakker explains that this focus on non-traditional lending has been a strategic move for Better Choice. “By transitioning away from prime or traditional loans, we’ve carved out a niche for ourselves in addressing the needs of a diverse group of borrowers and business owners who are often underserved by traditional lenders,” he says.
This trend reflects a broader shift in the lending landscape, where non-banks are increasingly filling the gaps left by traditional banks. Belinda Wright, head of partnerships and distribution at Thinktank, adds, “We’ve observed heightened competition in alternate income verification lending, driven by an increased number of lenders operating in the space, both traditional banks and non-bank financial institutions. This competition has been further fuelled by banks adopting more accommodating lending policies, making the landscape more dynamic but also challenging.”
La Trobe Financial is Australia’s leading alternative asset manager and a proven and trusted investment partner for institutional and retail investors with c. A$20billion in assets under management. Operating Australia’s largest retail credit fund, La Trobe Financial has the most diversified funding program of all non-bank lenders operating in Australia. Since 1952, La Trobe Financial has been driven to help people realise their potential with specialist financing and investment solutions.
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In the current economic climate, an intriguing phenomenon has emerged: seasoned borrowers with robust financial statements increasingly find themselves unable to pass certain technical assessments required by major banks. This has compelled many to explore alternatives to traditional banking, much to the benefit of non-bank lenders.
“The bias to automated lending assessments adopted by major banks has created a gap, especially for self-employed borrowers, SMSFs, borrowers new to Australia, property developers, to name a few, which non-bank financial institutions like La Trobe Financial are increasingly filling,” says Cory Bannister, chief lending officer at La Trobe Financial.
The rise of the alternatives
Belinda Wright, Thinktank
“We’ve observed heightened competition in alternate income verification lending, driven by an increased number of lenders operating in the space, both traditional banks and non-bank financial institutions”
THE PLAY Waiting for Godot, in which the eponymous Godot never arrives, struck a chord with audiences partly because it was written soon after the massive dislocations of World War 2 when people were understandably contemplating the uncertain nature of human existence.
As 2024 enters the home stretch, it seems clear that one of the year’s major broking themes has been a kind of financial equivalent – let’s call it waiting for rate cuts.
Australian businesses and mortgage holders have faced massive dislocation in the post-COVID hangover, and many may feel like lower interest rates are still excruciatingly beyond reach – or may arrive too late. Like Samuel Beckett’s play, the narrative for many lenders and brokers is all about mulling options and biding time while dealing with a lack of impetus.
Amid this climate of uncertainty, Australia’s non-bank lenders are experiencing a renaissance. These agile institutions, once considered fringe players in the lending market, are stepping into the spotlight as they fill crucial gaps left by traditional banks – offering a foothold for those in limbo.
Published 16 Sep 2024