The Rise of Non-Major Banks: What It Could Mean for You

Australia has lost its confidence in major banks, and non-major banks are on the rise.  Now more competitive and more trusted than major banks, these challenger banks are starting to be considered the better choice among mortgage customers and brokers.

In this article, we take a look at how non-major banks are dethroning major banks in Australia and what this could mean for you.

Why the Majors Are Worried

As innovative lenders come into the scene, it’s becoming inarguable: the Big 4 are losing the market share dominance. 

In fact, the biggest takeaways from last year’s KPMG Major Australian Banks report and Third-Party Lending Survey were that the major banks’ combined market share decreased by 81.2% and non-major banks were already leading, with the top banks being Bankwest, Macquarie Bank, and MyState Bank.

Part of this can be attributed to simple loss of vigilance. Big banks had so little competition for so long that they didn’t need to adapt as quickly to changing market forces or the new technology that customers have become accustomed to. 

But part of this also has to do with a new perception that major banks are not to be trusted. In the wake of the Banking Royal Commission, Deloitte Trust Index revealed that financial institutions have a lot of work to do when it comes to restoring customer trust.

  • 1 in 5 Australians believes that banks act ethically
  • 1 in 4 Australians thinks banks own their errors and keep their word to their customers

Why Non-Major Banks Are Winning

The most important thing for us brokers is that our customers’ needs are met. Our delight is in delighting our customers. Bearing this in mind, let’s take a detailed look at what we look for in lenders, and why non-major banks are winning compared to older, more traditional banking services. 

  • Product policy. For a very long time, major banks have had extremely anti-customer policies, or at very least have been perceived as having such. Non-major banks tend to be more lenient and understanding within their product policy, and that makes it easier for brokers to offer financial products that they believe in.
  • Product pricing. Non-major banks are able to offer very competitive prices because they often have lower overheads than major banks. Non-major banks are focused, whereas major banks tend to spread out into many products. Further, non-major banks tend to have fewer brick-and-mortar locations, which means they are able to invest their funds to innovate their pricing strategy.
  • Customer-centric staff. Today, new entrants are embedding customer-centricity in their business philosophies. Big traditional banks are trying to keep up, but there’s still a long way to go. Non-major banks put the customer first, thereby leading to better services and happier customers. Customers today want communication, and they don’t want to feel that their needs are being minimised by their banking solutions.
  • Great turnaround times. Non-major banks are able to turn around loans and other applications faster because they are not bogged down with decades of red tape the way that many traditional banks have historically been. For many customers, lending was a lengthy weeks-long or months-long process. Today, many applications can be turned around in a matter of days.
  • Commitment to the broker channel. Non-major banks are growing and scaling, and to do this, they need the broker channel. They understand that they need to develop a healthy relationship between broker and bank, rather than having a one-sided relationship.

In general, non-major banks in Australia are growing in leaps and bounds by embracing customer-centricity and fostering healthier relationships with brokers and in turn the customer. 

While major banks have suffered considerably in terms of reputation, non-major banks have been building that reputation. We are finding it easier to work with non-major banks as we can get our customers what they need.

Sydney city aerial view. Sydney CBD, Central Business District from above. Sydney downtown top view

What Does Non-Major Banking Mean for Customers?

For customers, the rise of non-major banks is entirely positive. This is primarily because of competition. With dozens of non-major banks vying for a customer base, it drives the prices down. It also forces even major banks to compete with smaller banks and, ultimately saves money for the customer in a variety of ways.

Customers are going to find that they have far more options than they did even just a few years ago and that they can work with smaller banks to get exactly the products and services they need. 

This leads to better customer care, more affordable rates, and an overall more positive experience.

Since customers can shop around, they’re also more likely to find and qualify for the products they need. 

Major banks have a long way to go if they want to restore customer faith and become competitive again. More competition is only a good thing, and major banks are going to need to win back their customer base after the Royal Banking Commission findings. 

Are you looking to buy your first home or refinance your property? Shore Financial has access to over 65 non-major lenders. We can provide low rates, quick transactions, and an entire panel of competitive choices to help you maximise your opportunity through strategic home loans. Contact us today to find out more.


Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.

Get in touch with Shore Financial today and maximise your opportunity through property!

  • Levels 3 & 4, 153 Walker Street
    North Sydney, 2060

  • 1300 416 700

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