Emerging online lender and local fintech Tic:Toc, which says it offers a full home loan approval online in just 22 minutes, wants to bust the myth that consumers still need bank branches to apply for a mortgage.

And its model, which includes sharing both the margin and the risk of default rather than simply taking a commission, is being underwritten by the Bendigo and Adelaide Bank.

When asked about the role of physical bank branches in a digital world, the big banks are adamant that consumers want to speak to a human in person when they are signing up for decades of debt.

But that’s a myth, argues Anthony Baum, Tic:Toc founder and CEO. And particularly so, if someone has already gone through the home loan approval process once, he suggests.

“There are so many myths in the home loan market. I think people use tactics that say it’s complex and that you need help as a mechanism to protect the status quo of the industry structure, not actually because it’s that complex at all,” Baum said.

We asked the former Bendigo and Adelaide Bank exec to tell us what the data says about the kinds of consumers who are comfortable using his service and how they use it.

According to Baum, The most popular time to apply for a home loan online is 7pm on Thursday evening — well outside regular office hours.

After one month in operation, around 25,000 people have visited the Tic:Toc website and 12,642 have begun applications on the platform, either by clicking the ‘Apply now’ button or experimenting by clicking the ‘Be curious, anonymously’ button.

The start-up built a digital decisioning system to assess and approve a customer’s online application in real-time, without the need for a human credit assessor.

The average age of applicants using the Tic:Toc platform is 41 for men and 39 for women, and it’s a 50/50 split between applications to refinance and to make a new purchase. The median mortgage repayment is $1,680 per month and a variable interest rate home loan is the most popular product on the platform.

Tic:Toc’s first settlement was completed last Friday, exactly one month after launch. The smallest loan “in the settlement pipeline” is $60,000 and the biggest is $1 million.

Applications demonstrate consumer interest but it’s settlements that matters most to Tic:Toc — they determine how much money the company makes.

“We margin and risk share,” Anthony Baum, Tic:Toc founder and CEO told Which-50.

“So instead of  just getting a commission on the loan we get a share of margin on the home loan over the life of the loan, but if the customer defaults we lose that income, so it incentivises us to lend responsibly and we share the revenue with the bank.”

Baum argues the early demand demonstrates Australians are ready to embrace the digital process.

The challenge for the nascent business now isn’t necessarily a technical one but a marketing one to convince skeptics the process — which reduces a 22-day process to just 22 minutes — isn’t too simple to be real.

“It’s about educating the customer at this point that there really is a true online proposition, and it really does happen in 22 minutes,” he said.

Baum acknowledges online self-service won’t be for everyone. (Although he’s confident attitudes will shift quickly).

“There will be some customers that want that [face-to-face] advice but, increasingly Australians are very financially savvy, they do virtually every other form of the financial transaction now online. For a growing segment of the population, their preference is for them to self-serve online, particularly if it saves them money.”

To establish trust with consumers Tic:Toc allowed users to try the service anonymously for the first month and it’s also planning to publish customer testimonials from early adopters.

Baum argues the technology platform is a more responsible lender because it removes human discretion from the process. An application has to pass a set of strict standards otherwise the computer won’t approve the application.

The Age of the Customer  

After witnessing the adoption of digital in other parts of financial services, Tic:Toc spent three years designing and building the platform to remove the inefficiencies in the home loan approval process.

“We realised that the whole home loan market was still a horrible customer experience and that the customer did not have control of the process in an age when really customers have control of most of their shopping experiences,” Baum said.

“And we felt that could be achieved and the technology was now available to completely revolutionise the industry.”

The company identified the technology suite it needed which includes 15 to 17 different technology components, two of those were built in-house and the rest are adapted from off-the-shelf technologies.

Fintech Partnerships

Baum says Tic:Toc is the first of its kind in the world. The closest offer in the market already is US-based Rocket, which doesn’t offer valuation and document generation, he said.

The development of the platform would not have been possible with the partnership from Bendigo and Adelaide Bank, which shared its IP and home loan experience with Tic:Toc to build the solution.

This IP makes the product difficult for a fellow fintech to replicate, Baum argues, adding that he thinks the big banks won’t be far behind with their own automated approval processes. However, Tic:Toc has the advantage as a digital native, not weighed down by legacy process and technology, Baum said.

He argues Tic:Toc can develop and iterate more nimbly than large financial institutions. For example, the first product upgrade is scheduled for next week which will add new features such as a save and resume function in the application process.

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