Ian Henscke: We heard about the disappearance of the car industry in South Australia in the first hour, well now we are looking at suppose you’ll have to say the new forms of technology creating jobs. Well this is one of them, you could call is disruptive technology, bit like that term that came up the other day with talking about the taxi industry. They have a code with innovative systems that can change the way we do business. Imagine this, you are able to go onto a site and you can put out your information and you can have people offer you a cheaper and cheaper home loan. Sounds a bit too good to be true, but I am assured by my next guest that it will work. His name is Mark Bevan and he is one of the people who came up with this idea.
Mark Bevan: Hello Ian, thanks for having me on.
Ian: Now your background, in finance?
Mark: Very much so, I’m a 30 year banker, spent 25 years with Commonwealth Bank, and 6 years with Westpac.
Ian: Now there are sites at the moment, in fact Peter Martin who was our regular economics commentator a couple of years ago said you could go on various sites now and you can almost beat whatever you’ve got by going to an online home loan site.
Now that’s true isn’t it, you can get a loan now online where you don’t even see a bank?
Mark: Look yes, the process can be completely on line which a lot of consumers are drawn towards now to potentially takes the human contact out of it now. The reality is that a lot of these sites are static data with comparison sites and the difference with Joust, we’ll be launching next week is that it’s a live, direct communication channel. We have actually provided our software to 7 lenders commencing next week who will actually receive your data and bid directly back to you on your mobile or laptop.
Ian: So it’s a sort of form of Ebay? You are saying would you like to lend me money, I will shift my loan to whoever offers the cheapest rate for that loan?
Mark: Yes, that analogy has been drawn before. Certainly there’s potential there, the empowering part is that you can set the time frame for however long you want your auction or your joust to run. We are suggesting a default period of say 3 days, so you’ve entered your data, the bank’s received that data, and they’ve got 3 days, you can reduce it down to 1 day if you are in a particular hurry or let it run a bit longer out to 5 days if you need, and you do you get that Ebay experience – watching the bids come on. A bank can’t put in a new bid unless it’s a lower rate than the previous bid. And there’s also total transparency for the lenders, the banks can actually see what each other is doing. So you create that magical competitive tension – that really can’t be delivered in a transparent way in any other form.
Ian: Why would banks want to get involved in this because it would seem to me that banks would say the home loan rate is X, just accept it, why would they want to get involved in a bidding war with borrowers?
Mark: Look we’ve appealed particularly to the challenger brands who are obviously looking to grow in specific either geographies or demographics, and look there was some jaw dropping moments, I’ve seen CEO’s jaws almost hit the floor when we tell them you’ll be able to see what the other banks are bidding in a live transparent dashboard, but the reality is they’ve all got their growth strategies. We are potentially a very low cost origination channel for new business for them they are all trying to embrace digital and innovation and we are potentially one of those disruptors.
Ian: Ok, what do you get out of it Mark Bevan?
Because you’ve come up with idea, you’ve invested money in it.
How do you make money, do you take a tiny slice of the mortgage do you?
Mark: Exactly. We have a success fee that we have negotiated with the banks, which is considerably lower than the typical broker front end fees or trail commissions.
Ian: So this is going to change the world of the mortgage broker, because that in a sense is what you are doing at the moment when you go to a mortgage broker. He says, “Oh leave it with me and I’ll can get back to you and I reckon I can do better than what your existing bank is offering you”. But they’ll tell you that won’t they – mortgage broker?
Mark: Yes absolutely. Look potentially the disruption will occur in the mortgage brokers space, we are appealing to the vanilla type of transaction – the non-advice model if you like. If you’ve got complex needs or if you’ve had a bit of a checkered credit history or your income fluctuates wildly or you’ve got 3 investment properties, you probably do need to get some advice. You should meet with your bank manager or your accountant, or your mortgage broker and get the right advice. Joust isn’t for you. So unlike a lot of digital offerings, we’re not out there for everyone, we are really just appealing to the good consumer, who’s got good equity in their home, a steady job and a good credit rating. Those customers are gold for banks. Banks would write deals like that all day long because they are the easiest, cleanest closest thing to no-risk transactions for banks.
Ian: Ok, so who are the lenders? One listener already wants to know:
Are these lenders Kocher as well? I mean how do we assure you haven’t gone to a shonky operator?
Mark: Nope, totally, certainly on our website joust.com.au you can even see who our partners are:
Ian: Well who are they?
Mark: BankSA, so in South Australia we are really pleased to have the 4 largest South Australian based players. BankSA, Bendigo & Adelaide Bank, Peoples Choice Credit Union and Beyond Bank and we’ve also got 3 interstate challengers being Bank of Queensland, Australian Unity and Gateway Credit Union.
Ian: So the big 4 - Westpac, ANZ, your old firm Commonwealth and the other one they’ve all decided they’re not going to…. Watching with interest.
Mark: They are watching us very closely Ian, of course with the ownership of BankSA, Westpac and St George have got a good sense of what our ambitions are and what our business model is and we’re in discussions with the major banks with a view for them I think to sit back and see what the response from consumers is to the Joust proposition with a view to participating at a later stage.
Ian: Alright we’re talking to Mark Bevan from Joust now we’ve had a couple of these issues come up over the last month, it seems to be the rage these days of someone the other day who was developing and has developed an online site where he got a couple of investors to invest $400,000- he went on the Shark Tank and he was offering on a website, tips for people that wanted to gamble and then if they wanted to see behind a pay wall they would pay a bit of money and they would get the tips, so it was an online site, now this is a man who was an engineer and he’s given up a career in engineering and to develop what is an app. You’ve given up a career in banking – why do you think this is going to work?
Mark: Look you’re right Ian, and just quickly I think that gambling app could have interest with a lot of my friends. Look you are right Ian, my background is banking and the original founders are bankers from way back. We’re not necessarily digital or technology people.
Ian: So how did you come up with the app? Or is it an app?
Mark: It’s a responsive online web app and so it’s – it won’t be available in the app store initially, we will consider investing in potentially building native apps if consumers are asking for that.
Ian: Is it free?
Mark: Yes it is free to consumers
Ian: So how do you get hold of it if you want it? You go online and you look up Joust?
Mark: Just to our website Joust.com.au and there’ll be a button there that’s obvious to start your Joust and you’re away.
Ian: Alright and there’s no fee, you have fees though if you leave your existing loan don’t you? because a lot of people - now what if you are already with one these? Say people are already with BankSA and you go on the site…
Ian: And you get them to bid for you, I mean they’ll know you are already with them won’t they?
Mark: No they won’t know, so the details that the lender sees is really just profile data and that’s another great thing about Joust is you are not going to be hassled by the 7 lenders or however many lenders we’ve got because all the lenders see is your year of birth, your postcode of the address of where the property is, your salary and income and until they win the deal that is you select them and following the Joust they don’t get your personal details so they don’t know exactly who you are. But our lenders have asked the exact same question, well what if we win one of our own customers back and my answer to that is well the Joust platform has assisted you retain that consumer who might of otherwise gone elsewhere for a better rate.
Ian: Mm and I suppose it points out in the US when they had that dreadful scandal there that bought down almost the whole worlds economic system, wasn’t it where they were just basically lending money to people who didn’t have the ability to repay…
Ian: and they ended up having this massive bailout. This system means that when the banker looks at you they say well I’ll invest in that person and give them a better rate because they are less risky.
Mark: Correct they can be selective our lenders because they can actually see that we give them the ability to filter what level of Veda credit score, that is your personal credit rating that they want to see. If they want to only see the very highest credit quality consumers, they can set their filters on the Joust platform and only look at those deals and only bid on those deals
Ian: I’ve heard about the credit rating agency that’s still there so the bankers can still look and make sure you’re not lying, can they?
Mark: Yes it helps us qualify the consumers coming to our site so we have built an API, that’s tech speak, that means our software talks to Veda the credit score bureau and picks up a consumers credit score. We send that information through to our lenders so that they can see a credit score band that they know they are talking about a consumer of a certain credit quality. Of course that gives them great confidence in terms of how hard they would bid.
Ian: Ok how low do you think it would go? Because we were talking to one of our money experts the other day and they said in America they are now down to very very low interest rates, I think they’re down to negative interest rates in some part of the world which I can quite get my head around but is it possible that you could get a home loan at say 2.5 or 3%? Are you likely to ever see that?
Mark: I think the Reserve Bank will dictate that in terms of what they do with the cash rate, so if they continue to lower the cash rate we may see 2’s for home loans. But right now with the cash rate where it is and home loan rates typically where they are.
Ian: What’s the standard home loan rate for say we are talking about an average home now of $300,00 talking about affordable homes of $300,000? What’s the home loan rate for that?
Mark: Ian, I expect I’m paying about 4.4% with Westpac at the moment. When I Joust next week…
Ian: You’re hoping to get it down to 3.9 or something are you?
Mark: I’m absolutely confident that one of our challenger brands will offer in the 3s
Ian: Right, and this is already happening on line with things like uBank, there are already sites already offering very low rates aren’t there?
Mark: There are online only lenders that do offer very competitive interest rates but of course the problem with those is you can’t have anything else, you can’t have a set off account, you can’t have a pay going into an account, they won’t let you have a bank account, etc, etc… so look there is a distinction to be made I think with online lenders only and real relationship banks.
Ian: Well it’s interesting the world of apps is happening and I suppose one of the things about this is that it is a disruptive system, in other words you are going to disrupt the banks in the way that they do their business, so it will be fascinating.
Now we are just getting a caller from.... a question here. They…. now one caller wants to know:
How about you can we see your credit rating, can we see actually sort out whether you are Kosher?
Mark: Um, Yes. Well I could probably put that up on our website if that was a help to anybody.
Ian: Because I suppose people they are going to be providing a lot of data aren't’ they.
Mark: It’s not a lot of data Ian but it’s a really valid point your caller makes. Joust is starting from zero so we really need to build trust and prove to everyone that we are very genuine, full of transparency and integrity.
Mark: And they will be the values that hopefully come through in our business.
Ian: So it’s happening with the taxi industry and now it’s happening with banking. Thank you very much for your time this afternoon Mark Bevan.