BANKING customers could be delivered much cheaper deals on daily banking products if a smaller home loan lender wins its battle to gain approval to roll out other offerings.
Loans.com.au remains one of the fiercest lenders in the mortgage market and has snared tens of thousands of customers by delivering razor-sharp home variable interest rate deals as low as 3.39 per cent.
This arguably has put the heat on rival lenders who have been forced to offer even cheaper deals.
But Firstmac managing director Kim Cannon — who owns loans.com.au — said he now wants to smash the bank oligopoly and provide a whole suite of other banking products.
To do this he said the lender faces the giant hurdle of trying to secure a banking licence which would allow them to take deposits and offer other deals such as day-to-day transaction accounts and credit cards.
“What we’ve done in the home loan space I want to be able to do in banking and credit cards and really provide some sort of competition,’’ he said.
“At the end of the day the four major banks run and control about 99 per cent of business.
“We proved it (we can increase competition) in home loans so why can’t we do this.”
Gaining a banking licence in Australia remains difficult — the Australian Prudential and Regulation Authority is responsible for authorised-deposit taking applications while the Australian Securities and Investments Commission allows an organisation to conduct a financial services business.
But Mr Cannon, who is yet to apply for a licence said his biggest challenge to get a licence himself was being restricted because an individual person is unable control more than 15 per cent of a bank.
“We have bank ownership law problems and a lack of competition, we don’t have competition in this country,’’ he said.
If he is eventually successfully he wants to deliver single-digit credit card interest rates and minimal interest returns on day-to-day transaction accounts.
This week the big four banks came under scrutiny at a parliamentary inquiry into banking practices including their treatment of customers.
The Australian Bankers’ Association’s chief executive officer Steven Munchenberg has hit back at claims there isn’t enough banking competition in Australia, but conceded it was a “challenge” for new institutions to obtain a banking licence.
“If you do a bit of work on a financial comparison site you can get a free transaction account, a credit card with an interest rate less than 10 per cent and a home loan with a rate less than four per cent,’’ he said.
“The main challenge to get a banking licence is around deposits, you can’t take deposits without a banking licence.
“We have a system in Australia if you put your money in a bank or authorised-deposit taking institutions then there’s a very strong guarantee it’s safe.”
Mr Munchenberg said to maintain the banking guarantee which was instilled during the global financial crisis and protects a depositor’s funds of up to $250,000, a tight reign needed to apply on who could successfully obtain a banking licence.
Consumer watchdog Choice’s spokesman Tom Godfrey said while maintaining strong banking competition in Australia was critical to ensure customers walked away with the best deals possible, he believed “relaxing rules won’t protect consumers.”
“It’s more likely to lead to sharks and shonks entering the industry, with consumer losing even more,’’ he said.
“Consumers do need better offers and a more competitive banking system.
“The Federal Government should conduct a thorough review of competition in the banking sector to explore options that will shake up the big banks and protect consumers, not harm them.”
Originally published as Little lender takes on big banks