26/03/2025
The Growing Challenge from Non-Banks
National Australia Bank (NAB) has long been a pillar of Australia’s banking sector, but a growing threat is emerging from non-bank lenders, who are steadily claiming more market share in the Australian lending space. While traditional banks have dominated for decades, non-bank lenders have been quick to capitalise on opportunities created by tighter lending regulations and changing customer needs.
NAB’s Response to Market Changes
Adam Brown, NAB’s broker distribution executive, recognises the rising competition from non-bank lenders. He explains that the bank cannot afford to stand still and must continue to invest in its business to stay ahead. Non-bank lenders, institutions that do not accept deposits, have taken advantage of regulatory changes that have made it more difficult for traditional banks to offer flexible lending options. These non-bank lenders are particularly catering to self-employed borrowers, non-residents, and those with less-than-perfect credit histories – segments that traditional banks often find difficult to serve.
Non-Banks Continue to Gain Market Share
Since the Global Financial Crisis, non-bank lenders have steadily grown their market share. According to the Australian Bureau of Statistics, non-bank lenders accounted for 11% of the residential home loan market in 2024. Additionally, research firm Foresight Analytics estimated their share of the commercial real estate debt market to be about 16%. This growth has been driven by fewer restrictions in lending criteria, allowing non-banks to approve loans more quickly and provide funding to borrowers who might struggle to meet the stringent requirements of traditional banks.
Traditional Banks: Leveraging Their Strengths
Despite the challenges posed by non-bank lenders, NAB is focusing on its own strengths. While non-banks have the flexibility to provide faster solutions, NAB continues to emphasise the broader benefits of banking with a traditional financial institution. NAB offers not only home loans but also a full range of banking services, including access to ATMs, branch locations, wealth creation advice, and opportunities for commercial lending. These additional services create an ecosystem that can support customers throughout their financial journey, which NAB views as a significant advantage.
Investing in Technology to Stay Competitive
In response to the growing competition, NAB is actively investing in new technologies to enhance its services. The bank is expanding its broker channel and increasing automation to make the home loan process more efficient. By improving the speed at which loans are assessed and responses are delivered, NAB aims to remain competitive in a market where speed and convenience are key. Additionally, NAB is leveraging artificial intelligence to streamline routine tasks, allowing staff to spend more time with customers and brokers, enhancing the overall service experience.
Tailored Solutions for Niche Markets
NAB is also focusing on attracting specific customer segments with tailored offerings. For example, the bank has expanded its Lenders Mortgage Insurance (LMI) waivers to include professionals like accountants, solicitors, and barristers, in addition to health professionals. This move is aimed at attracting high-value clients and supporting sectors that may be underserved by other lenders. By offering these specialised services, NAB hopes to differentiate itself from non-bank lenders that are targeting more niche markets.
Supporting Self-Employed Customers
Self-employed customers have long been a key focus for NAB, and the bank has recently updated its policies to better support this group. NAB now accepts a single year’s tax return or financials supported by tax returns for self-employed individuals, making it easier for them to access home loans. This is particularly important in Australia, where a growing number of people are choosing self-employment as a career path.
The Need for Ongoing Adaptation
While NAB is taking steps to modernise its offerings, it is fully aware that the landscape is evolving. Non-bank lenders are becoming increasingly attractive to borrowers seeking more flexible and personalised lending options. These lenders have the ability to tailor their services to niche customer groups, making them a strong competitor to traditional banks, which may struggle with their more rigid structures and regulations.
The Future of the Lending Market
As non-bank lenders continue to increase their market share, it is clear that traditional banks like NAB must continue to adapt if they want to maintain their dominance. NAB’s vast network and range of services still provide an edge, but the bank must keep investing in technology, innovation, and customer-focused solutions. In a competitive market, NAB’s ability to evolve and meet the changing needs of customers will be key to its ongoing success.
