ME Bank looks to e-signatures, digital loan process

Speaking to Mortgage Business following the release of the bank’s results for FY20, ME Bank acting CEO Adam Crane outlined that the bank was working on embracing more digital technology to enable loans to be written remotely.

Noting that ME Bank was among the early adopters of remote VOI when the COVID-19 pandemic first hit (enabling brokers to verify a borrower’s identify via digital means such as FaceTime of Skype), Mr Crane added that the bank was working towards making more of the home loan process remote-enabled.

Mr Crane said: “We were quick to adapt our systems and processes to support customers, working with key business partners to offer new ways for consumers to access the banking services they needed. 

“For example, ME was one of the first banks to pioneer a new virtual customer verification system to ensure our well-developed team of mobile lenders and broker partners could continue to support and service customers while maintaining safe social separation.”

The acting CEO told Mortgage Business: “The home loan process, we think, should be simple and easy and be able to be done as remotely as possible. 

“We’ve put a lot of interim steps in and we’ve made a lot of improvements, but there is more to do.”

Mr Crane told Mortgage Business that the bank was about to launch e-signatures (as opposed to physical/wet signatures) and had been “working with partners to introduce that as an acceptable solution” on home loan documentation.

“We are certainly looking at digital signatures now and we are out in the market to get a whole new end-to-end home loan engine running,” he added.

NPAT up, home loan settlements down

Looking at the FY20 full results, the acting CEO said the bank was “really happy” that its underlying net profit after tax was up 24 per cent to $123.9 million and its net interest income was up by 10 per cent.

According to the acting CEO, the increase was brought about as the bank “focused on tightening up on spending and growing customer numbers” and deposits.

However, he noted that while the bank’s overall loan book grew by 2 per cent (to $25.5 billion), settlements were down 15 per cent on the previous year at $5.5 billion.

When asked what caused the drop in settlements, Mr Crane noted that the bank suffered from “servicing issues” at the start of the financial year, which slowed turnaround times.

“The market also got highly competitive, particularly in the last quarter of the year as well, and we saw a lot of business flowing to the majors who had large cashback offers and very low rates,” he said.

“While we did see outflows, as soon as one of them (the majors) turned off their cashback, we saw flows coming back.

“So, part of it comes down to that competitive environment and the fact we were just focusing on where we could get an acceptable return rather than chasing everything.”

He added that broker flows had also increased this financial year, rising from 70 per cent to 72.5 per cent.

“Brokers play an important role in the market, and we are happy to interact with them around home loans,” Mr Crane said, noting that ME Bank joined a new broker panel in the last financial year.

“We are focused on brokers as a core channel and building our capability for that channel over time, as well.”

Redraw and deferral update

Touching on the controversial redraw policy decision that drew the ire of banking customers earlier this year, Mr Crane reiterated that the bank’s intention was good but it “got it wrong” on execution.

Mr Crane told Mortgage Business: “What we’ve seen is that only about 23 per cent of those customers asked for a full or partial reinstatement of their redraw, but the majority that were changed have been left in place.”

The acting CEO said the bank has now contacted the majority of customers who had asked for their former limit to be reinstated to ensure the “health of their home loan and that they understand what their payments would be if they draw down”.

“We just want to make sure they don’t get into difficulty, which is what the driver was in the first place,” he said.

The non-major lender has also now commenced its six-month check in with customers that have deferred their mortgage repayments, with Mr Crane suggesting that the bank had contacted approximately 7 per cent of these customers.

According to the acting CEO, around 25 per cent of customers had reverted to full repayments prior to this check-in period, adding that the “vast majority” of customers contacted have chosen to restart payment.

However, he added: “There are a small number who are unfortunately having to go to the hardship process because they just don’t have a pathway back, and there are a small percentage going into extended deferrals… but, overall, it’s pretty positive compared [with] what the industry was expecting, but it’s early days.”

Mr Crane concluded that the bank will continue to take a “cautious” approach to managing its capital, liquidity and funding while the COVID-19 pandemic and its associated economic impacts play out, adding: “With interest rates at record lows, and in our view remaining low for some time, we will continue to focus on profitable, sustainable long-term growth and will execute our business strategy accordingly.

“Helping Australians get ahead is at the core of everything we do and is why we will continue to support the financial wellbeing of our customers and communities and be the genuine banking alternative that Australia needs during this time.”

[Related: ME Bank appoints chief risk officer]