Fintech start-ups threaten mortgage broking old guard amid royal commission heat

The emergence of fintech disrupters to the lucrative mortgage broking industry is being driven by three key dynamics.

First, banks pay $2 billion a year in commissions to mortgage brokers for the delivery of home loan borrowers – but want to pay less.

Second, the Hayne royal commission is investigating whether current broker pay structures create conflicts of interest and exploring better ways to serve customers.

Third, technology is making self-service easier, and “open banking” will put customers in control of their data, including all the information required to make a mortgage application.

So enter the mortgage broking entrepreneurs and a bunch of start-ups ruffling the feathers of the powerful incumbents.

Take, for example, Hero Broker. It launched two weeks ago with a mantra to redirect the savings from its technology efficiencies back to customers.

Redundant role

Founder Clint Howen reckons under open banking, applying for a mortgage will be as easy as pushing a few buttons, to enable the necessary information to flow in the background. This will make the traditional broker’s role of filling out and submitting application forms largely redundant.

Even before open banking arrives, Hero Broker is using an automated application process to save customers the entire amount of the upfront commission currently paid by banks to brokers. This is typically about 0.6 per cent of the value of a loan.

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Source: Fintech start-ups threaten mortgage broking old guard amid royal commission heat | afr.com