With house prices across Australia continuing to soar, the market for home loans is heating up as the major banks seek to capture the younger tech-savvy generation with Bendigo and Adelaide Bank (ASX: BEN) confirming their acquisition of fintech business Ferocia for $116 million.
The acquisition is driven by Bendigo Bank’s response to changes in the banking consumer market where neobanking services prioritise user-friendly services, becoming a major disruption to the major banks. This cohort of the data-rich paperless generation have shown a strong preference for digital-only application processes which do not require handing over folders of documentation as required by traditional home loan applications.
Having developed the Up app, Australia’s highest rating banking app of which 30% of users are saving for a home loan, Ferocia will provide its customers with access to Bendigo Bank’s digital home loan partner Tic:Toc. Named similarly to the social media platform for instant videos, Tic:Toc offers customers with a hassle-free online home loan application for faster approvals.
“Up’s customer engagement is unparalleled when compared to global peers, it’s welcomed more than 400,000 customers and $840 million in deposits in less than three years, it’s empowered a new generation of savers and it will secure our market leading position with this emerging, influential demographic,” said Bendigo and Adelaide Bank Managing Director, Marnie Baker.
“As we further accelerate Up’s rapid pace of innovation and growth and further expand revenue opportunities through Up, customers of our other brands will benefit from Ferocia’s digital innovation and experience.”
The 100% acquisition of Ferocia for $116m will be paid entirely in BEN shares with its founders Dominic Pym and Grant Thomas having collaborated with Bendigo and Adelaide Bank since 2013 on the bank’s digital banking platform before launching Up in 2018.
Upon completion, Ferocia will fall within Bendigo and Adelaide Bank but maintain autonomy by operating independently as a standalone division to support its unique innovation, engineering, and design culture.
“The launch of Up ushered in a new digital banking age through a unique fintech and bank partnership. With a vision to be Australia’s number one consumer lifestyle brand, the time is right to scale Up through a deepened relationship and new product offerings from the Bank, whilst bringing Ferocia’s expertise to the rest of the Bank’s highly engaged customer base,” said Pym.
Bendigo Bank’s push for customers through the acquisition is part of the wider technological arms race unfolding in Australia’s banking industry. With trust in the Big Four having hit all-time lows following the 2017 Royal Commission into Misconduct in the Banking sector which has prompted all of the Big Four to seek new branding via acquisitions and incubation projects with a focus towards digital-only services.
A similar acquisition took place in January 2021 when NAB acquired neobank 86,400 for $220 million while Commonwealth Bank has flagged its intentions to offer 10 minute home loan approvals and a new Buy-Now-Pay-Later service that they expect will rival Afterpay.
Much of this pull away from the Big Four was brought upon by the rise of Afterpay which earlier in the month was acquired by US-based payments giant Square for $39 billion, highlighting the value of its younger tech-savvy customer base.
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