FinTech Event, Sydney

Last Thursday I had the pleasure of attending my first FinTech meetup since arriving in Sydney, entitled, ‘Disintermediation & diversification: How will FinTech impact finance brokers?’. Hosting the discussion was Glen Frost, joined by David Jackson, CEO of FundX, Vincent Turner, CEO of uno Home Loans, and Peter White, CEO of Finance Brokers Association of Australia.

Challenging the status quo

With such a lively title, this was a great opportunity for the incoming disruptors to lay down the gauntlet and demonstrate how they were challenging the status quo in the broker community, which for too long has been serving itself instead of the customers.

This topic is one that the entire Financial Services community should be taking notice of. Many of the emerging FinTech businesses are proactively trying to disintermediate established financial institutions by approaching one niche aspect of the financial ecosystem, such as loans, investment, property, invoice finance and remittance, and create an online, transparent and easy-to-use product. Furthermore, each of these niches are individually worth several billions in revenue annually.

The human aspect of home loan

One of the most interesting discussions was the human aspect of applying for a home loan. There are two aspects to this. The first is that currently banks require a face-to-face ID verification for home loans. As a result, this process is not online, and adds an extra layer of pain to the customer journey. This may be the point where the customer caves and decides to use a broker. The second aspect came from Peter White, CEO of the FBAA. Based on his long-standing career, (which turns out is longer than Vincent Turner, CEO of uno Home Loans, is old) he believed that people will always want to discuss significant financial transactions such as home loans, with a real person.

Currently he is correct, and even a digital native such as myself prefers talking to a person when making important financial decisions. However, Vincent at uno, a platform for individuals applying for home loans, pointed out that the typical customer profile at uno was mid 30s to 40s. This demographic represent the overlap of digital natives who also have the money to purchase property. With only 1,400 customers, I would be interested to see when individuals who have grown up with technology their entire life start buying property; whether we will see an increasing comfort in a completely online process and an evolution from using traditional brokers, to online broker platforms, such as uno.

To broker, or not to broker?

Conversely, FundX, a platform that SMBs can use to fund outstanding invoices to improve cash flow, have partnered directly with the broker community to generate new clients from both an investment and invoice perspective. Phil Foweraker, a former broker, gave the audience an insight into the world of brokers, articulating the significant opportunity for brokers to continue to act as this intermediary. This is unsurprising, SMBs are particularly difficult customers to market to, so as a result the existing broker network is essential for a growing business to acquire customers. From my experience of working with similar FinTech businesses in the UK, once the business reaches a certain size, or receives enough investment, they will naturally look to cut the cost being paid to the broker, or at least bring that cost in-house through marketing and talking to the customer directly.

Looking ahead

To conclude, the broker community is still an essential part of the growing FinTech ecosystem, they are providing FinTech businesses with leads and enabling them to grow. However, businesses like uno will ultimately aim to disintermediate the brokers, by creating an completely online process (subject to regulation and banking partnerships) aimed at savvy digital natives. Or, companies such as FundX will aim to outgrow their lead-generation via brokers to a more direct approach. Either way, the broker market is evolving, and currently they need to work closely with the FinTech ecosystem to enable its growth, whilst also considering what’s next as these businesses start to eat away at their client base.

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