When main banks are too slow, advisers turn here – however, market share has remained small
As regulators consider how to open up New Zealand’s banking sector, specialist lenders say they cannot be left out of the conversation. In its 2024 draft market study, the Commerce Commission found that 90% of banking assets are held by just four institutions – ANZ, ASB, BNZ and Westpac – and that meaningful disruption is unlikely to come from overseas.
Instead, it pointed to smaller banks and non-bank lenders as the best prospect for shaking up the status quo in the near term. But for that to happen, those lenders say they need room to grow, and that starts with regulation that acknowledges their differences from the big players.
Avanti Finance CEO Fred Ohlsson said the status quo has made it difficult for challengers to grow, with most of the home lending market still firmly in the grip of the big banks.
“The market share is static, and perhaps even shrinking a little in the home lending space,” Ohlsson said. “In the last few years, we’ve found that around 98% of every home lending dollar goes to the main banks. They’ve widened their risk appetite, which is something that happens when the economy isn’t growing as quickly.”
Regulation needs to reflect market diversity
While the Commerce Commission has acknowledged the structural advantages held by large banks, Ohlsson says there’s still a tendency for regulation to treat all lenders the same, regardless of their size, structure or customer base.
“You sometimes see them painting the whole industry with the same brush, and they don’t consider that not all lenders are major banks,” Ohlsson said.
“You can’t have a sledgehammer as a solution – you may need different tools for different parts of the lending sector. We’ve seen that with some LVR and DTI requirements where everyone is hit with the same legislation, and the consequences aren’t necessarily thought through.”
Ohlsson said organisations like the Financial Services Federation (FSF) are playing a key role in changing that mindset. The FSF’s members currently support more than two million consumers and businesses, many of whom fall outside the scope of traditional banking.
Avanti is one of the FSF’s long-standing members, and Ohlsson said this gives the lender a platform to advocate for more tailored regulation that recognises the role these providers play.
“Being part of the FSF is an important step for us. As a sector, we have over 1.4 million Kiwis as customers,” he said.
“They’re the ones getting credit, getting help to fund their aspirations and dreams, so not forgetting about us and having consideration for how we do things is vital for regulators to bear in mind.”
Flexibility matters in a slow-moving market
Advisers know better than anyone the frustration of waiting weeks for a main bank to make a decision, especially when a client needs fast answers. In that space, specialist lenders have increasingly become the go-to for deals that require speed, flexibility, or a more nuanced assessment.
But that reliance doesn’t come without its own challenges. Ohlsson said lenders like Avanti are frequently brought in to do the heavy lifting on tight-turnaround or complex deals, yet there’s no guarantee those deals will stick.
He added that specialist lenders have also moved beyond being a “temporary fix”. While some clients will still prefer to structure deals this way, other deals simply won’t be touched by the main banks.
“There are things we do that the banks never do,” he said.
“We also know that the property service levels of the banks have been very slow. It can take weeks to get an answer, and in those cases we see advisers coming to us, because they know that they’ll get an answer within days. That doesn’t necessarily benefit us, because we might spend time on a deal, and then not secure it.
“However, having options and making sure there’s fertile ground for us and keeping us on the regulatory roadmap is really important.”
