Qantas already issues its own credit cards, provided by Citigroup, and provides frequent flyer points to a range of bank-issued credit cards. But the link-up with Valiant shows that it is keen to broaden its reach into financial services and provides an example to other outsiders of how banking products can be added to their digital services, a dynamic being referred to as “finance at the edge”.
Source of continued growth
It also illustrates how Qantas, despite slumping to an almost $2 billion loss in the 2020 financial year as it was battered by travel restrictions and border closures, is keen to join the banks as a member of “Team Australia” by linking its members who, like the airline, have been hit hard by the coronavirus crisis with capital to aid their recovery.
“Providing our members with products and services that support the evolution and rapid digitisation of financial services will fuel the continued growth of Qantas Business Rewards and the recovery of the small business economy beyond COVID,” said Qantas Loyalty CEO Olivia Wirth.
The entry of loan brokers into the market began the break down of bank-controlled product distribution, but rapid advancements in technology and government policy settings like the consumer data right, are set to put even more pressure on bank margins.
Danny Gilligan, co-founder of Reinventure Group, which is a Valiant shareholder, said its deal with Qantas shows that a wide range of companies can become fintechs as they distribute financial services.
“Every company in every industry vertical has the right to take a share of the financial services value chain,” he said. “Banking has been built up on distribution, proprietary data and providing a treasury function – but all are being unbundled and attacked.”
All of the major banks are members of Valiant’s lending panel, so under the deal Qantas could become a referrer of new businesses to them. However, Valiant also hosts a range of other lenders, such as Judo Bank and non-banks like Pepper, Prospa, Moula and La Trobe, which could drive customers to big bank competitors and disrupt their customer relationships.
Qantas will embed a ‘Business Loan Selector’ into its frequent flyer website, pushing its members to Valiant to access working capital, asset finance and commercial loans and the airline will receive a fee based on the amount of loans it refers, to be taken out of the commission that Valiant receives from lenders.
Keen to return to business as usual
A recent survey of Qantas’ business rewards members revealed the need for the new loan referral service. It showed more than 80 per cent are concerned about the impact of COVID-19.
Almost one in five worried about keeping positive cash flow, paying bills, controlling expenses and staying profitable; while one-in-four businesses planned to seek financial support in the form of credit or a business loan.
“Our members are keen to return to business as usual and we want to support them in every way we can,” Ms Wirth said.
Qantas, which is laying off 6000 staff as the pandemic grounds planes, has been seeking to expand its frequent flyer partners as credit card spending falls. Valiant has created technology that matches lenders to the needs of business owners and allows them to compare rates, terms and fees from different lenders, enhancing competition in the market.
Valiant’s co-founder, Alex Molloy, said the pandemic crisis had tested the platform as the supply of capital dried up in April and May. Lenders “restricted industries and geographies for loans that would have sailed through before the pandemic. But lenders have started to come back”.
He said Qantas’ thinking reflects a broader trend, which will see more companies “get involved at the intersection of financial services and their customer base”, including those managing contractors, retail platforms and financial advisers.
“Finance is now somewhere on all of their strategy road-maps,” he said. “Companies with a degree of customer ownership realise they can leverage that to offer finance adjacent to their business, and to participate in the benefits of referring that offering. Before now, the cost and effort has been prohibitive. But now we are seeing a lot of thought going into white-label offerings.”
The ability for non-banks to offer or broker financial services will be boosted if Treasury adds “write access” to the consumer data right. This will allow accredited third-parties to open and close financial products. Treasury’s inquiry into the future directions for the Consumer Data Right, conducted by King & Wood Mallesons partner Scott Farrell, is expected to deliver a report to Treasurer Josh Frydenberg this month.