Former nab staffers embrace Judo

December 20, 2016
Richard Gluyas, The Australian

The launch of Joseph Healy’s business bank has been set back to early next year, as the group secures long-term funding, beds down its board and continues to hire senior bankers to lift total staff numbers to about 40 by the time it opens its doors in March.

The latest high-profile recruit to join the Judo Capital board is the former federal minister for small business Bruce Billson.

Executive ranks have also been boosted by the addition of Jacqui Colwell, formerly chief risk officer at National Australia Bank’s personal bank.

Judo is shaping up as a reunion party for NAB refugees.

Healy, of course, is the former head of the business bank, while his co-chief executive at Judo is ex-NAB colleague David Hornery. Among the other founders are 25-year NAB business banking veteran Tim Alexander, NAB’s ex-chief of Asia banking Kate Keenan, and the former Woolworths group services manager and head of NAB’s online bank Ubank, Alex Twigg.

For the sake of diversity, Healy has also recruited Standard Chartered executive general manager Chris Bayliss. As Healy has previously stressed, Judo is not a fintech. Its target market is businesses with an annual turnover of up to $20 million, using a business model that owes more to the British challenger banks and specialist SME lenders Aldermore and Shawbrook.

Aldermore has no branch network, serving customers online, by phone and face-to-face through a network of 12 regional offices, while Shawbrook has used a similar model to build a loan book of more than £3.3 billion ($5.7bn).

Healy believes the $250bn SME market in Australia is overdue for disruption.

Business customers are increasingly alienated from their main financial services provider.

The big question is whether their frustration is superficial or powerful enough to make them consider alternatives.

Three times this year, Healy and Hornery have toured through Hong Kong, Shanghai and London to drum up support from investors.

Judo, according to Healy, has raised “tens of millions” of dollars in working capital, mostly in Australia but also Singapore.

The company is yet to secure a banking licence from the Australian Prudential Regulation Authority.
Healy, however, expects Judo will be making loans to small businesses by early to mid-March.
Mine could be shafted The long-term demand and supply fundamentals in carbon-intensive coalmining are facing further disruption, after a new weekend power plan by the Indian government that rules out construction of any new coal-fired power stations for the next decade.

According to Adani, the plan has no impact on the Carmichael mine in Queensland because the coal is for the company’s own power stations. But with NAB ruling out participation in a Carmichael funding package, and ANZ Bank effectively taking the same position at its annual meeting on Friday, the future of the proposed mine remains clouded at best.

Fintech compromise

As 2016 closes, the relationship between legacy institutions and fintech companies has reached another turning point. Fintech, the brash upstart, was initially intent on dominance through total disruption, but now has a grudging respect for the scale, if not the agility, of the industry’s decades-old incumbents.

If phase one was all-out disruption, the dominant feature of phase two has been collaboration, with phase three likely to be some kind of hybrid model. The hype that lasted several years has been diluted by a recognition that most fintech companies operate in a small, targeted niche of the financial services value chain, with very few aiming to take over the entire banking relationship.

There has also been a cooling in the white-hot venture capital market.

While global VC interest in fintech companies remains high, the big investments of previous years are less common, with the number of deals and the total value of fintech investment declining in the third quarter of 2016 compared to the second quarter.

Total VC funding is unlikely to exceed the 2015 peak of $US14.5bn but overall investment is still on track to exceed last year’s total.

It’s not surprising that the “World Fintech Report 2017”, compiled by technology consultancy Capgemini, found there was a consensus among industry executives that fintech was having an impact, but little agreement on how far it would go.

After interviewing more than 100 senior executives and surveying 8000 customers in 15 countries, the firm found that some executives believed fintechs did not have the ability to scale or maintain a unique value proposition.

Fintechs also lacked the capital of large financial institutions and faced uncertainty in venture capital funding. Hardeep Walia, founder and chief executive of the Silicon Valley start-up Motif Investing, which invests around business themes, said: “I always say follow the money. Does it change the economics of investing? If not, then it is usually a sign that it is not innovation, certainly not disruptive innovation.”

Against that, customers have been embracing new fintech providers, with 50.2 per cent of those surveyed already having done business with at least one non-traditional firm.

The so-called big tech firms such as Amazon, Facebook and Apple also represented an even bigger potential threat, because they had scale, superior data analysis capabilities to match and high levels of customer trust.

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