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How important are brokers in the specialist banking market?

Jordan Williams | 17:00 Wednesday 21st March 2018

Brokers are an important channel for newly launched banks, a number of industry professionals have claimed.

Specialist banks have made concerted efforts to both attract brokers and provide new systems for them to utilise.

Last month, Starling Bank announced it had partnered with a number of financial services platforms to offer its products through its in-app Marketplace, including a partnership with online mortgage broker Habito.

In June 2017, specialist bank Aldermore enhanced its brand refresh by launching a new intermediary website.

Both Masthaven and Tesco Bank have shown the importance of brokers to their businesses by announcing new broker partnerships.

The newly launched trade body Financial Intermediary & Broker Association (FIBA) has already secured the support of two specialist banks, United Trust Bank and Masthaven.

How important are brokers to new banks?

Jo Breeden, managing director at Crystal Specialist Finance, said: “Both brokers and specialist packagers are almost essential to new specialist banks, a number of [whom] have no direct arm which enables them to use their processing resource more efficiently.

“This in turn keeps overheads down and means their products can be very competitive.'

Philip Acton, CEO at CivilisedBank, stressed that new banks needed to attract business.

“Brokers are, therefore, a very important channel for a new bank, like CivilisedBank, to get their loan offer in front of potential customers.

“At the same time, brokers offer SMEs advice and choice as they look to obtain a loan.'

Maria Harris, director of intermediary lending at Atom bank, said: “As a brand new bank building a proposition and balance sheet from the ground up, having access to a trusted and sustainable broker market is essential.

“We strongly believe using brokers ensures our customers receive the very best service and advice when choosing a mortgage.

“At the moment, our distribution is entirely intermediary driven, but as the industry moves towards Open Banking and connected platforms, we expect to see a greater customer demand for self-service.'


'What does that lender do to fill a gap?'

When asked what new banks can do to attract new broker contacts, Jo said: “For us, it's about added value.

“What does that lender do to fill a gap?

“If they try to compete solely on price, then this can be difficult against some of the more established banks.

“If, however, they can add value through a niche product, enhanced processing times, systems or requirements, then this would attract the market to use them.'

Maria added: “We've taken a big step away from traditional banking systems and have created a transparent and low-cost banking model that's driven through our self-service customer app – the first of its kind in the UK for a mainstream residential lender.'

Philip added that CivilisedBank targeted bankers that had existing broker relationships and who would work locally to develop new ones after they joined.

He added: “The aim is to provide brokers with a speedy service and provide flexible loan solutions that bigger banks don't have an appetite for.

“In the medium term, we're looking to provide brokers with a portal.

“This will streamline their collaboration with the local banker and give them transparency about the progress of their client's loan applications.'


What can new banks offer to assist brokers that other banks won't?

“Systems and innovation are big wins – how easy can they make the broker journey and how [quickly] can we get to the outcome for the client,' said Jo.

“Flexibility and understanding is another quick win, as is the drive to lend and to find a solution.'

Matt Stevens, director at the Mortgage Genie, believed that intermediaries should be given access to all the mortgage products on offer from a provider and that new banks should avoid dual-pricing situations.

“Additionally, to make the prospect of working with a new or specialist lender as attractive as possible, new banks should consider creating exclusive deals that mortgage brokers can access on behalf of their clients.

“Finally, new banks should try to offer dedicated support for their intermediaries.

“Having a reliable point of contact makes a massive difference, as it helps everything to run much more smoothly.'

A recent feature published by Bridging & Commercial found that access to key decision makers at lenders varied “massively' in the specialist finance market.

Maria said that Atom bank used the latest technology and integrated systems, such as its mortgage sales and originations software from Iress and its customer-facing app.

“The online broker portal allows the broker to simply scan and upload any supporting documents for the application without the need to post anything in and, in addition, the customer receives all their documentation digitally – they even accept their offer in app.'


Putting brokers at the forefront of business

Given the value brokers can bring to a new bank, should the latter see broker relationships as a key focal point in their business?

Philip has estimated new banks can do up to 90% of their business through brokers.

“It really depends on the decision about their route to market,' he added.

“They may want to focus on brokers as their primary distribution channel to reach customers or decide to reduce their reliance on brokers over time.'

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