Former bosses of Westpac, the Commonwealth Bank and National Australia Bank have invested in Nano Digital Home Loans as it looks to expand partnerships with lenders grappling with a potentially disruptive shift towards online lending.
In a recent capital-raising round, former Westpac chief executive Brian Hartzer, former NAB chief Andrew Thorburn and ex-CBA chief Ralph Norris all invested in the digital upstart, which was founded by former Westpac executives Andrew Walker and Chris Lumby.
Nano is one of several digital lenders alongside Tic:Toc and Athena Home Loans looking to disrupt the lucrative mortgage market by offering fast online approvals.
The non-bank lender was launched earlier this year, and Mr Walker said it was approving about $20 million in loans a week, putting it on track to write more than $1 billion in loans in its first year.
The investments from former bank CEOs come as Nano, which was launched by selling loans to consumers, is looking to expand by offering software services to banks and other lenders dealing with a shift to online lending.
Nano said it was recently granted a patent for its “Automated Real-Time Digital Mortgage Application and Decisioning Engine” by the Australian Patents Office. Mr Walker said while other lenders had software that automated certain processes, such as making loan decisions, Nano’s system covered property valuation, credit assessment, loan serviceability and customer identification.
Mr Walker said he thought the shift towards online mortgage lending, which has occurred to a much greater extent in the United States, was now happening faster than he anticipated in Australia. He argued that if Australia followed the pattern seen in the US, the annual flow of new digital home loans could surge to $100 billion in a few years.
But although challengers such as Nano are experiencing strong growth, their share of mortgage lending is still tiny compared with the dominant big four banks, which control about 80 per cent of the Australian market. The biggest player, CBA, is launching its own digital mortgage later this year.
Mr Walker argued that such was the need for lenders to improve their technology processes that some with obsolete systems could face an “extinction level event on the horizon”. He invoked the fate of video rental chain Blockbuster Video, which went bankrupt in 2010.
“This is the new frontline of competition across the industry. Those that cannot meet the new digital service standard will face a Blockbuster moment” Mr Walker said.
Mr Hartzer was CEO of Westpac between 2015 and 2019, Mr Thorburn ran NAB between 2014 and 2019, and Sir Ralph led CBA between 2005 and 2011.
Mr Hartzer, who has made other fintech investments since his exit from Westpac, and who also chairs “pay on demand” business Beforepay, confirmed the Nano investment but did not comment further.
Mr Thorburn did not comment and attempts to contact Sir Ralph had been unsuccessful at the time of writing.
Clarification: A previous version of this story described Beforepay as a buy now, pay later company. It has been updated to say the business provides “pay on demand” services.
Originally published by Clancy Yeates, 30 September, 2021, Full article here.