return on equity from mortgages. Although the rapid growth in home loans is clear evidence that the market is already under disruption, however, it is a new breed of fintechs, namely low-cost digital loans, that threaten this large profit pool.
Although there have been many efforts over the years to disrupt the market, it is the non-bank lenders which banks find themselves in a competitive battle with. For instance, Athena Home Loans uses online channels to deliver quick, convenient, low-cost mortgages. So does, Nano Digital Home Loans, a non-banking lender founded by two former Westpac executives. Accordingly, it is believed that the mortgage market would be subject to a digital disruption similar to the one inflicted by Uber on taxis.
Despite such competition, it must not be forgotten that big banks are starting from a position of enormous strength, with deep pockets and easy access to technology. It would be no surprise to see them relying on their huge budgets for technology and marketing, and not backing away from fight over a slice of this profitable market.
However, some experts, such as Airtree Ventures partner James Cameron, claim that banks are at times “victims of their own success”. They are of the view that having operated as huge institutions over many decades, if not centuries, banks have in fact struggled with major technology transformations, since rapid change do not come naturally to them.
Nevertheless, there is no doubt that just like every other major industries, mortgages too will inevitably face a digital shake-up. Although non-bank lenders and other financial service providers appear to be on the forefront of this big shift, it is yet too soon to determine if they will be capable of threatening the home loan profit factories of big banks and other major players in the industry.
