5 Aussie fintech firms that are shaking up the home loan business
The home loan industry is about to change - and these Aussie startups are leading the way.
The home loan market is a multi-billion dollar industry that hasn't yet seen the same disruptions as other finance industries. But that's about to change. Fintech companies boasting apps, algorithms, blockchain solutions and automated platforms are all promising to make the process of buying a house easier and faster.
Here are five Aussie fintech companies who are poised to shake up the home loan market.
Tic:Toc launched earlier this year with a headline grabbing promise: the 22-minute home loan (application that is, not your repayments). This startup uses digital technology to turn the manual, weeks-long business of processing a home loan application into an automatic one that occurs in real time as you enter your details.
Given how hot (or overheated) the Australian property market is, offering speedy home loan approval is a pretty useful point of difference. It also helps that Tic:Toc's home loans are quite competitive offers.
How accurate is property pricing? Or more importantly, how do you know what a property's really worth? REALas promises more accurate property price predictions. According to the REALas website, the company has developed "a proprietary algorithm" which uses "a range of historic and crowd-sourced data to give you the most accurate sale price predictions possible."
It sounds confusing, but you can test their predictions for yourself. All you have to do is enter the address of a property for sale into REALas and it provides a prediction in seconds.
The company claims its predictions respond to changes in market conditions and are accurate within 5% of the final sales price of all properties they track.
Rather than the usual approach where would-be borrowers apply directly to a lender or broker, Lodex lets you set up a profile with all your financial details. Then the lenders come to you, competing for your business.
While this is already a unique approach, Lodex goes further. In addition to your credit score the company has developed a "social score." This is a combination of data points about your lifestyle, shopping habits, consumption and digital behaviour which is used to determine how creditworthy you are.
This might sound like an invasion of privacy, but the company stresses that it isn't compulsory, and it could help borrowers with bad credit prove that they're trustworthy.
It's a little hard to explain what Moneycatcha does. The company's product, Homechain, is a digital platform for managing the home loan process, from application all the way to settlement. The company uses blockchain technology (a way of maintaining data permanently and securely across a wide, shared network of computers) to speed up the lengthy, often cumbersome process of getting a home loan.
How fast? Moneycatcha says it can slim the whole process down to just five days through automation. Because blockchain data is extremely secure and can be verified quickly, a bank using Homechain is able to complete every step of the process quickly.
It's essentially an all-in-one application management and data process. If a few big lenders get on board it could be a game changer.
In the property investment end of the home loan market, BrickX offers a very unique investment opportunity through fractional property investment. What does this mean? The answer's in the name.
Rather than take out an enormous loan to buy an entire property, BrickX lets investors put smaller amounts of money into "bricks" or fractions of a property. The money is pooled with other BrickX users and the profits are shared.
You can earn both rental income and a share of the property's capital when you decide to cash out (if the property has grown in value).
BrickX acts as a kind of agent, buying properties it considers quality investments, and then selling theoretical bricks of each property to hopeful investors.
While investing through BrickX may seem less lucrative than buying your own investment property there are some very appealing aspects: your risks are lower and can be spread across multiple properties, and you can exit a "brick" far more easily than you can sell a house.
So is it all high-tech hot air or the future of home loans?
Skepticism in the face of new, complex technology is easy to understand. But there's no doubt that fintech companies are changing the way businesses operate, and few markets are more ripe for a shake-up than the home loan market.
Many of the big banks clearly think so too. ANZ has already acquired REALas, while Tic:Toc's home loans are backed by the Bendigo and Adelaide Bank. Moneycatcha has teamed up with HSBC. Westpac's venture capital fund Reinventure has put money into BrickX.
Your home may still be bricks and mortar but your home loan could soon be entirely digital.
- The key to investing in property during lockdown
- Home stretch: 1 in 3 Aussies would move if they could work from anywhere
- How much less can you borrow under new APRA home loan rules?
- RBA Survey: Half of experts say Big Four will raise rates out of cycle, cash rate holds
- RBA survey: 56% of experts predict a cashless Australia by 2031