Bank directors like me all over Australia are talking, thinking and planning strategies around the impact of technological change on finance, customers, and on bank’s, building society’s and credit union’s value propositions.
There are many different ways technology is changing finance but the launch earlier this month of dfinanz.com could be game changing if it catches hold. It could really apply pressure to Australian bank’s interest rate margins and consequently their earnings.
That’s because dfinanz is a social network for financial information where the idea is to simplify the way consumers figure out how to get the best deals on home loans and other types of finance. That’s something that many Australians already do by using mortgage brokers. Around 50% of all home loans are now sourced via the broker channel.
What’s unique about dfinanz is by using its website as a financial social network it takes the discussion from a one-on-one between broker and borrower and spreads it to a wider audience. Take Claire’s comment on the website from 2 days ago.
But what dfinanz also does, besides provide a platform for a conversation, is give borrowers a platform to load the details of their mortgage, including interest rates, and enter the type of rate they are seeking. dfinanz CEO Tim Bloomfield describes these as “fair rates”.
Bloomfield says that after just a week of fair rate contributions from users, “76% of Fair Rate contributions have come from customers of the ‘big four’ banks”.
The wide range of rates users were declaring they were paying for variable rate loans being paid to “domestic banks” by borrowers in a “range from 4.10% up to 4.89%, with an average variable interest rate of 4.62%”.
Interestingly these same borrowers thought “a variable rate of 4.11% would be fairer.”
That sounds like a ridiculously low interest rate but Bloomfield says “there are a substantial number of variable home loan interest rates being offered from various lending institutions with interest rates clustered either side of this 4.11% level. Some are even as low as 3.99%.”
That’s incredible. Joseph Schumpeter would be proud.