Avenue Bank is creating an agile and flexible digital-first business banking experience to address the underserved market.
The fintech is focused on creating cash flow solutions for Australia’s small and medium-sized enterprises, with plans to optimize and digitalize the issuance of banking guarantees, reducing the process to under 48 hours.
Chief Digital Officer and Co-Founder Dale Hurley said iTnews Podcast From its inception, the team wanted to “put digital at the forefront of everything we do”.
“We clearly want to enable customers to interact with us the way they want to interact.
“If someone wants to fill out the form online or in person that’s great, but again, there will be other customers who either want to speak to someone or actually see someone.
“Our vision is to enable customers to interact with us the way they want”.
In terms of building its technology, the strategy is to “buy for commoditization and build for differentiation”.
“The whole idea is that there’s a whole stack of systems where you won’t get a competitive advantage if you build them yourself,” he said.
“Where there is an opportunity to gain a competitive advantage, that’s where we are building our own.”
Hurley said this could be in its digital application forms or our credit risk assessment algorithms, where the team has identified ways “where we can improve the customer experience and differentiate ourselves from our competitors. “
Pursuing a cloud-native approach, Hurley said everything the startup has built [is] On the cloud in our AWS environment, or we are using our vendors’ clouds like Force.com [for Salesforce] or Equinix” as well as SAP’s cloud-based banking platform.
Hurley said the company was founded in 2017 following the sale of CreditorWatch to Infotrac, a Sydney-based software as a service (SaaS) company.
After the sale, Hurley and Avenue Bank co-founder Colin Porter looked for new opportunities, and “started talking about bank guarantees”.
“The problem we had in our previous business was that we had less than $600,000 of bank guarantees locked out.
“We were raising venture capital. The process of getting bank guarantees was a horrible process and we also had issues with landlords losing bank guarantees and we thought this was a great opportunity to digitalize them.
“New in 2018 [APRA] “The restrictive licensing regime emerged and we thought the time was right to address this problem in the bank guarantee market.”
By August 2018, operating under the Go Blank name, Avenue Bank slowly began putting together its Authorized Deposit Taking Institution (ADI) application.
In September 2021, the bank was granted a restricted banking license ahead of onboarding its first group of customers under limited banking business authorization in November 2022.
The bank now operates under a restricted authorized deposit taking institutional licence, Which APRA has recently extended from the initial date of 7 September this year,
The Treasury and APRA have extended Avenue Bank’s restricted licensing deadline until March next year.
A restricted license means that Avenue Bank has limits on deposit amounts and has simpler prudential requirements when building its business.
After this time, the plan is to launch into the market, “first working with various distributors, brokers, and then going directly to market to reach customers”.
Hurley said the bank guarantee sector is “the only area of banking that is really ignored by those in power.”
“You’ve got a $1.4 trillion mortgage market, which is very attractive. Then you have the bank guarantee market, which is worth about $8.6 billion
“It’s a very small part of banking that we think is a great opportunity to be able to become a specialist bank in that area and really focus on that product to unlock cash for Australian businesses “
He said that under its current APRA restrictions, Avenue Bank is allowed to bring on only 15 clients at a total value of $450,000, which would lead to a “very small introduction to the market”.
However, once the bank receives its full license, it plans to go to market with its low deposit bank guarantee product and “open up considerable liquidity for small and medium businesses”.
Taking customer feedback into account
Hurley said listening to customer feedback has played a role in shaping its technology development.
“One of the things we are doing is that people who have an existing bank guarantee are replacing it with Avenue Bank.
“The process is a bit involved in that the customer applies, gets their New Avenue Bank Guarantee, and then they have to provide the new Bank Guarantee to their landlord and get their old Bank Guarantee back and keep it with them. Have to return. Existing banks.”
As a result of feedback received from two customers on the process the bank developed an “infographic that explains the process” to assist in making the switch.
Constantly listening to customers helps create solutions, with the team sending out surveys well in advance of sales processes and following up with customers “to really understand, what they like and don’t like.”
Hurley sees Avenue Bank’s business model as having longevity in the financial landscape.
While other neobanks have come and gone over the years, Hurley said its offering plays a key differentiator that could play a role in the sustainability of the business.
“What we saw with the early neos was that a lot of them launched with deposit products in the beginning.
“For a bank, a deposit product represents a liability on their balance sheet. We’re launching with a revenue generating product from the beginning, so the deposits we take won’t create a liability that won’t have an asset on the right side of the balance sheet.
“Which is really important because revenue generating businesses are what will make you sustainable in the long term.”
hands on approach
Despite taking on the CDO role, Hurley said his position is “certainly much broader than digital strategy”.
“At the moment I am also leading the distribution. Too, [I’ll] Help raise capital and help the business do whatever makes sense.”
Since there are only 17 employees on the team, “everyone is really fully skilled and does whatever they need to do.”
“One of the great things about how we work at Avenue is that every quarter we have planning sessions.
“We’re forced to rank everything that we need to do and, as an executive committee, it’s very difficult to be like, ‘Your priority is actually going to take priority over my priority.’
“But that forced ranking means that by the end of the two-day planning session, we’ve got our 25 initiatives down.”
“Then as we go down the list, we don’t work on those items unless higher priority items are being worked on.”
Be careful on generative AI
While the bank takes advantage of some AI that CreditorWatch has developed within its lender evaluation algorithms, Hurley said generative AI will be adopted with more caution.
“Obviously there are a lot of underlying technologies that power AI these days, but in terms of GPT and things like that, we don’t have the bandwidth to assess it and figure out what we can do for our business. How can we take best advantage of it?
He said people see the technology as a “silver bullet” and are “trying to find problems it can solve without appreciating the limitations of GPT”.
“It’s one of those technologies that people really need to understand a lot more about and understand how it really works and operates.”
Hurley said it “should be monitored really closely” and that it is not “a solution you should rush into.”
“It opens up opportunities, but before you even install the chatbot… using GPT, you really want to make sure that what it’s saying or allowed to say is actually true. “
a year from now
As the new year approaches, Hurley envisions Avenue Bank will operate as an unrestricted bank whose growth plans will “really try to gain a stronger foothold in the bank guarantee market,” before adding “additional products.” “which free up cash flow.” professions.”