Banks walk away from online lenders to focus on their own offerings
(11 June 2018 – Australia) Westpac and Commonwealth Bank have both ended their referral relationships with online lenders as the big banks seek to regain some of the small business lending market they walked away from.
Westpac had been working with Prospa in an agreement which saw Westpac refer borrowers that didn’t satisfy its own lending criteria to the fintech. CBA had a similar agreement with OnDeck however both banks have decided to focus on their own product offering.
NAB developed its own unsecured small business lending product, QuickBiz, to compete with fintechs and says it is faster and cheaper that start-up offerings. However the bank is understood to apply tougher lending criteria to prospective borrowers.
The major banks are unlikely to develop unsecured lending products at the high-risk end of the market, given the increased level of scrutiny on high interest rates, including by the competition regulator. Yet banks may seek to acquire the fintechs’ better quality customers by offering them more attractive rates, making the lending books of the fintechs riskier.