Judo Bank co-CEO David Hornery spoke about challenging dominant incumbent lenders not only by leveraging cutting-edge technology but, interestingly, returning to the roots of relationship banking.

«Having worked in commercial and investment banking for 30-plus years, [we] saw what was fundamentally a market failure in the provision of banking services to small and medium-sized businesses in Australia,» said Judo Bank’s David Hornery during Temenos’ recent virtual event, TCF Online.

According to Hornery, Australia’s big four lenders – Commonwealth Bank of Australia,Westpac, ANZ and NAB – had reduced the quality of its offering to small businesses despite a dominant share of the country’s banking market (85 percent) and the extraordinary returns generated. 

«The four major banks and the oligopoly they have had hugely industrialized and dehumanized the offering to small business.»

Relationship Manager Access

Greater accessibility has always been a key promise from industry disruptors be it access to lower fees and minimums, access to digitalized products and services or access to user-friendly platforms.

In Australia, the greatest pain point in this regard is access to relationship managers. 

Hornery cites various related issues such as the inability to make timely decisions, general unresponsiveness and high turnover rates that require re-training relationship managers for specific client needs.

Early Days

As a result, co-founders Hornery and Joseph Healy decided to pursue the creation of a challenger bank in 2015 that was «purpose-built, focused squarely on the small to medium-sized business sector» in Australia.  

Extensive research was conducted especially in the U.K. where Hornery highlighted challenger banks like Monzo, Aldermore and Shawbrook as examples of success stories in disrupting the small business banking oligopoly. 

As of the end of March 2021, Judo Bank was the dominant neobank leader in Australia with 70 percent of household deposits (A$2.16 billion), according to data from the Australian Prudential Regulation Authority, doubling from a year ago.

Return to Roots

Although Judo Bank is effectively a neobank born in the cloud, Hornery notes that technology is an enabler and not its defining factor. Instead, it is actually focused on more traditional values from the banking sector. 

«One of the things that was always going to be the central piece of our proposition to small businesses in this country was going back to the craft of relationship banking as it used to be done a decade ago or more ago,» he said, highlighting high-touch services that spotlight client relationships and the understanding of their needs.

«[This] was the complete antitheses of what we saw in the system.»