We noticed a thread earlier this month proclaiming the death knell to brokers in Australia as peer-to-peer lands, so with our experience at rebuildingsociety, we thought we would set the record straight and argue for brokers to embrace the opportunities it presents. For platforms, it’s an essential aspect to any distribution strategy.
New platforms like Marketlend and ThinCats Australia will need to effectively reach the business community. They have an online presence (content, PPC advertising, PR), but they need the support of those close to the ground that speak to their target market on a daily basis and reinforce those messages.
To build scale and therefore awareness, they’ll need to do high volumes of deals and they won’t do that just by going direct.
There’s the option for a business owner to go to a platform directly and make an application, but why do they go to brokers in the first place? They take the hassle of compiling and submitting a case away from the owner and the quality of cases that come through brokers are typically higher and save platforms a lot of time knocking them into shape. At rebuildingsociety, the typical time from initial application to draw-down from an introduced case is half that of a direct case. Paying a procuration fee at market rate is a cost any new platform will gladly pay.
Taking a new product to market is a hard slog – even more so when it’s a new product in a new market. The National Association of Commercial Finance Brokers (NACFB) in the UK embraced peer-to-peer straight away, recognising the benefits of speed (weeks vs months for a bank deal) cost (much smaller margins mean value is passed to borrowers and investors) and simplicity (platforms don’t need every transaction from the last three years and a 100 page business plan to make a decision!).
Similar bodies in Australia could do the same and refresh their image and membership base, so winning the cooperation of membership bodies is a sensible strategy for platforms and mutually beneficial.
A new product is a great excuse for brokers to send a mailshot to their databases or pick up the phone to someone they haven’t spoken to in a while. It’s also something different to the big banks. They might now be able to help companies that previously wouldn’t have been considered. This isn’t to say new platforms should take the scraps, but underwriting criteria will be different, so it’s worth revisiting old cases.
The main gripe of the initial article was that platforms will go direct wherever possible in the pursuit of profits. However, what this missed is the need for platforms to really engage an audience that will eventually do marketing for it, through word of mouth and recommendation. While direct applications from experienced applicants will be more profitable, missing the opportunity to engage a potential brand ambassador should be grabbed with both hands at such an early stage.