SYDNEY, Australia—U.S. CUs can look to Australia for possible answers to addressing the threat to loan portfolios from the new Silicon Valley lenders.
Analysts and credit unions have stated that many CUs need to streamline lending operations to offer faster loan decisions, and focus more on web marketing and online applications to compete with the convenience and speed of these new lenders, such as Lending Club and Square Cash.
Now, CUA, Australia’s biggest credit union, is considering deals with peer-to-peer lenders to help boost its unsecured lending and make it more profitable, the Sydney Morning Herald reported. The CU is experiencing flat earnings in 2015 and is predicting new loan growth will not be as strong in 2016.
Chief Executive Rob Goudswaard told the Herald that his focus now is improving the credit union’s net interest margin, which has fallen from more than 2% to 1.9%. In CUToday.info’s Pricing Week series many analysts stated that competition from the new online lenders will likely make it more difficult for credit unions to improve their net interest margins, even as rates rise.
CUA, which emphasized any deal is likely 12 months away, said a P2P partnership will give the credit union greater access to new and younger borrowers, as well as make the CU an "investor" or lender on their platforms.
"We see P2P as being a possible partner for us. We haven't at this time worked out exactly what that looks like, but we respect and recognize those capabilities," Goudswaard told the Herald.
Goudswaard emphasized a partnership with a P2P lender would be a fast way to streamline the CU’s lending process.
"Some P2P lenders offer a very strong digital interface so you can get a personal loan in six keystrokes. Rather than invent that yourself, there's a solution there for you,” he said. “Second, some have a very strong understanding of the risk of that personal loan book and you could work with them to construct that risk profile to help your own book.”
SocietyOne and RateSetter, Australia’s largest P2P lenders, said they have had discussions with numerous lenders about partnerships, the Herald reported.
"Over the last three years we have been operating in Australia, we have had a number of mutuals and ADIs (authorized deposit taking institutions) approach us that have an interest in investing on our platform," SocietyOne chief executive, Matt Symons told the Herald.