Personal loans: Young borrowers desert banks for better deals

Borrowers are turning away from traditional banks when applying for personal loans, flocking to digital, mobile-centric platforms and peer-to-peer lenders.

A recent CommSec Economic Insights report showed loans by non-bank financial institutions were up 10.3 per cent for the year to August. This was an indication that banks were engaging in “more considered” lending and borrowers had other options, according to CommSec chief economist Craig James.

“Banks are facing greater competition from non-banks,” Mr James said. “At the same time bank deposits are only lifting at a 2.5 per cent annual rate, putting greater reliance on external funding. It is clearly a competitive and challenging environment for financial institutions.”

Peer-to-peer lender SocietyOne has become the first marketplace lender of its kind in Australia to hit $500 million in loans, to 20,000 Australian borrowers, and is on track to reach $1 billion in 2019.

Society One CEO Mark Jones said the influx was largely about convenience for the next generation of borrowers.

“Millennial consumers have been increasingly demanding a fairer, faster, easier and more personalised mobile-centric solution from almost every brand they transact with,” Mr Jones said. “Think Uber, Airbnb and the rest of the sharing economy. Financial services really is no different.”

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Source: Personal loans: Young borrowers desert banks for better deals | The Mercury