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Non-bank lender experience good growth

Innovation and additional product offerings are key areas of focus for the non-bank sector as they look to shore up growth in the face of ongoing disruption from P2P lenders.

Thursday, December 22nd 2016, 7:04AM

by Owen Poland

John Kensington

In its latest Non-Bank Financial Institutions Performance Survey (FIPS), KPMG says finance companies and credit unions experienced a year of strong growth that was driven by increased consumer confidence and fuelled by house price growth, strong employment and low interest rates. In addition to a 17.4% rise in total assets, to $11.01 billion, after tax net profits rose by 8.17% to $207.78 million.

Noting the significant changes that have taken place within the personal/consumer lending space since P2P lenders entered the market, KPMG says that survey participants are taking a proactive approach in response to the threat by developing sophisticated Fintech capabilities of their own.

However before an entity embarks on a Fintech campaign, KPMG’s Head of Banking and Finance, John Kensington, says it is crucial that non-banks properly consider whether the implementation would complement existing service/product offerings and support the sale of more business, or whether it would replace it. In that regard, a judgement needs to be made about whether to 'turn off' the old model and rely solely on the new model for doing business.

In the future, KPMG says companies that have yet to embrace data analytics "might find themselves lagging behind, or even out of business, as they struggle to keep up with competitors."

But while transitioning an entire lending process to an online platform may reduce processing times, Kensington says it is not without its risks. Lenders will need to consider the speed and ease of getting a loan out to a customer, and ensuring that the necessary and appropriate level of checks have been performed in accordance with the responsible lending code.

"As the non-bank sector moves its lending and deposit processes online, it will be intriguing to see how the sector will address the trade-off between loan growth, socially responsible lending, and the sharing of risk."

Non-banks are also exploring beyond their conventional operating model to find potential products that will compliment their service/product offering.

For the vehicle financing industry this could range from providing extended warranties, liability insurance, maintenance service contract, parts, accessories an finance, and KPMG says the potential is much greater.

The captive insurance market is another option, whereby the entity provides a loan and some other form of insurance is established with the individual. But while this strategy may help increase sales, Kensington says it could divert much needed resources and attention away from core activities if not managed appropriately.

The KPMG survey also highlights concerns about the risk of cyber attack and says that the development of each new product or distribution channel, while necessary to enhance customer experience, brings with it another area needing to be protected from cyber threats.

Given that financial services organisations are a prime target for cyber attacks, KPMG Head of Cyber Security and Technology Risk, Philip Whitmore, says that focusing on technology alone is not enough. "Effectively managing cyber risk means putting in place the right governance and the right supporting processes, along with the right enabling technology."

Tags: KPMG Peer to Peer Lending

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.19 4.25 4.49
ANZ Special - 3.69 3.75 3.99
ASB Bank 5.20 4.25 4.19 4.39
ASB Bank Special - 3.75 3.69 3.89
BNZ - Classic - 3.69 3.75 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 4.29 4.29 4.49
HSBC Premier ▼5.79 ▼3.65 ▼3.69 ▼3.85
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.40 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.65 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 3.78 3.78 3.99
Sovereign 5.30 4.35 4.29 4.55
Sovereign Special - 3.85 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.79 3.84 3.99
The Co-operative Bank - Standard 5.15 4.29 4.34 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.69 4.79 5.19
Westpac - Offset 5.34 - - -
Westpac Special - 3.69 3.75 3.99
Median 5.50 4.29 4.25 4.19

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