Digital lenders offer quick loan solutions

by Antony Field16 Nov 2021

86 400 and OnDeck are at the forefront of a revolution in mortgage lending as more brokers turn to market-leading fintechs for fast, efficient access to finance for their clients.

Fintechs are leading the way in the digital transformation of financial services, particularly when it comes to home loans.

While 86 400 and OnDeck have been ahead of the game in using digital tools, brokers and their clients are also embracing technology, and much of this has been driven by the pandemic putting a stop to face-to-face meetings.

Australian Broker caught up with 86 400 head of lending Melissa Christy and OnDeck national channel and partnerships manager Nick Reily to learn more about how fintechs are changing the face of lending.

Christy says 86 400 was very excited to learn that it had been named Fintech Lender of the Year at the Australian Mortgage Awards for the second year running.

“Of the other finalists, we were the only lender dealing with residential home loans,” says Christy.

“I think what has set us apart from the other fintechs is we’re the only residential home loan lender in the market with a streamlined digital process for brokers.”

86 400 has launched new products and tech features this year which also give it an edge in the fintech space. One of these is the smartbank’s 85% LVR, no LMI home loan.

“Our 85% no LMI product has been very well received and has expanded our market to appeal to more customers,” Christy says.

“We haven’t placed restrictions on who can qualify for the product, and it is not a limited-time offer. You don’t have to be a first-time buyer or a purchaser; it’s also for customers wanting to refinance to a better deal, and the product has no restrictions on loan amount either.

“This year we also launched our direct (online) channel and introduced OCR Labs to make the whole VOI process even easier. We are focused on streamlining the process to make the end-to-end experience better,” says Christy.

Reily says OnDeck is not just a fintech lender; it’s also a dedicated small business lender.

“The two combined mean we are able to deliver exactly what small business needs – access to fast, efficient funding,” he says.

“As a fintech, we harness the latest technology to deliver a streamlined application and approval service. Instead of asking small businesses and their brokers to complete reams of paperwork, we only ask for bank statements to be uploaded to the secure OnDeck portal. From there, we use our in-house risk assessment algorithm, The KOALA Score™, to decision an application.”

Reily says OnDeck takes a very different approach to traditional lenders, which look backward and often ask for previous years’ tax returns to make a lending decision.

“This approach is particularly lacking in relevance during the pandemic, because, as we’ve seen, businesses can be closed for several months during lockdowns and then experience a tremendous uptick in revenue once restrictions are lifted.”

Through technology, OnDeck is able to deliver a swift response on loan applications, says Reily.

“With our Lightning Loans, brokers can have a decision on their client’s application in as fast as 30 minutes, with funding in as fast as two hours.

This is considered to be among the fastest, most accurate lending decisions in the small business market.

“This is vastly quicker than the banks, which can take weeks to get back to a broker regarding a small business loan application.”

Christy says 2021 has been an amazing year of growth for 86 400.

“We’ve added many more aggregator partners this year – PLAN, FAST, Choice and Finsure. We recently hit $1bn in home loan balances, and September 2021 was by far our biggest month for applications.”

Being a purely digital bank means 86 400 was already well placed to cope with the challenges of COVID-19.

“We haven’t had to make changes for COVID-19 as our process has never dealt with physical documents, and we don’t require a broker to see a customer in person.

“The introduction of OCR Labs, though, has helped greatly with this latest COVID outbreak, as applicants complete VOI themselves on their mobile – it’s a two-minute task.”

As Australia emerges from pandemic lockdowns, Christy says the opportunities for 86 400 are endless.

“With the backing of NAB and our team always working to refine our processes, we’re set to be an even stronger force in the mortgage market going forward.”

NAB’s ownership of 86 400 and the merger with UBank will also strengthen the fintech.

“We will be able to move faster and provide more and more enhanced features and functionality, to provide an even better experience for our brokers and their clients.”

Christy explains why 86 400 is so well placed to assist brokers and their clients with their finances in the months and years ahead.

“We have a very strong and passionate distribution team and a strong customer service ethic. We have competitive products and fees. And we’re working hard on streamlining our process further with the aim to make it much faster to get an approval.”

OnDeck’s recent tech innovations – The KOALA Score™ credit assessment tool and Lightning Loans – are game changers for the lender.

“The KOALA Score™ is something we’re really excited about,” Reily says. “Developed in-house in 2020 by our team of data scientists, it uses a sophisticated blend of big data, predictive analytics and statistical techniques in combination with data from multiple credit reporting agencies, including illion and Equifax, to build a holistic picture of a small business and support more tailored risk assessment.”

The KOALA Score™ gives OnDeck the ability to analyse the personal credit scores of business owners – a unique feature of the new credit model.

“It’s a plus for newer enterprises, sole traders and partnerships, which typically do not have the substantial volume of commercial data required by traditional lenders.”

Reily says the development of The KOALA Score™ has led to the launch of OnDeck’s Lightning Loans, which are available for unsecured funding of up to $100,000.

“These are super-fast loans, with funding in as fast as two hours. This is a plus for both brokers and their clients as it lets the broker seal the deal sooner, while giving the business the funds it needs to seize immediate opportunities without delay.”

OnDeck does not ask for loan security – just a director’s guarantee. Reily says this is different from many lenders that require property, often the business owner’s home, as security for a commercial loan.

Recognising how tough it has been for businesses during COVID, OnDeck offered a four-week repayment holiday to all new and renewal loan customers during September and October.

“This supported brokers’ business growth and the cash flow needs of their small business clients.”

OnDeck research revealed the potential this had to help brokers expand their commercial lending, with one in five small businesses more likely to take out a loan if they had a repayment holiday option.

Reily says OnDeck experienced a 175% jump in broker-originated small business finance between January and June 2021 compared to 2020, as the economy reopened.

“We expect to see the same uptick in activity as restrictions ease across NSW and Victoria – potentially more so as the lifting of lockdowns coincides with the start of the festive season and the reopening of international travel.

“There is plenty of pent-up consumer demand, and consumer spending will flow through to business investment, benefiting all aspects of the economy.”

In September 2021, OnDeck experienced a 33% uplift in loan applications from NSW small businesses in September compared to the month before.

“The upshot for brokers is that small business lending is definitely worth adding to their suite of services. The opportunities over the next 12 months will be impressive.”

Reily says OnDeck is well placed to help brokers and their small business clients in a variety of ways.

These include providing funding for loan sizes that the big banks aren’t interested in – the average size of Lightning Loans is $62,000 – as well as fast, efficient funding with no security required (just a director’s guarantee).

The lender also provides extensive support for brokers through its team of dedicated business developers and loan writers who are specially selected and trained to work in OnDeck’s Broker Business.

“For brokers new to small business lending, our experienced team can take a broker’s client scenario and do the heavy lifting for them – and brokers only ever deal with one person.”