Alex Bank understands part of the key to its success is appreciating the foundation of banking while offering the market something sometimes fails to do – meet the needs of its customers.
“We started Alex Bank in a shed near the Brisbane airport,” said CEO Simon Beitz on the iTnews Podcast.
"It was an industrial shed. One of our shareholders said, 'You can have the space for free'.
“We got some furniture. There's nothing more industrial or even innovative in sitting somewhere like that it.
“I think a couple of months earlier it was a panel repair shop, to all of a sudden saying, 'This is where we're starting a bank and what does that look like'”.
From modest beginnings, Australia’s newest challenger bank, Alex Bank, believes its fast turnaround time for customer loan approvals and targeting segments overlooked by the broader market will keep it marked for success.
Beitz told iTnews that ensuring the technology foundations are capable of scale and instilling the right processes are just some of the key elements to building a bank.
“There's getting your tech right and making sure you've got the right tech foundation to scale and build," Beitz said.
“When we talk about systems and processes, they need to work really well together. And then also of course, funding is really important when you're building a bank to make sure that you've got your investors or your capital lined up to help pay for that journey.
“My final recipe to building a bank is making sure you've got great people,” Beitz said.
Beitz added one factor that’s been key from the bank’s perspective is “also not being afraid of having technology or information and systems that we have an unconscious bias towards never throwing away or renewing.”
This entailed working with partners “to get started” before eventually starting “to iterate that technology and build our own” capabilities.
"The team [will] say, 'Okay, this was good enough to get us to this point - what can we do to continue to enhance that?'"
He added that being “narrowly-focused” was beneficial, as “if you're too wide, you'll never get anything done”.
“We've always been very focused," he said.
"Alex Bank was the first bank to have two deposit products and two saving loans products in the market at the time of us getting our ADI [license], which again I put down to that narrow focus.”
The three-month mark and banking costs
Alex Bank was granted its banking license at the end of 2022, and with its penchant for recalibrating its work every three months, Beitz said it is already renewing its app.
“That's about again, that iterative or continual learning through the customer experience," Beitz said.
“We don't rest on our laurels. We're saying, 'How can we enhance that?' You also start to see the edge cases as you get your customer flow through.
“We're pretty good at the stuff down the middle, just as a normal loan or a normal term deposit or a deposit, but when you start to incur things like, someone passing away or something else, you've got to navigate the edge cases are there.”
Beitz said Alex Bank is also looking at its product roadmap as well, which is expected to include small business loans and mortgages.
“We see some huge opportunities to support Australian small businesses and we think that they've been neglected by Australian banks for a variety of different reasons," he said.
As “everyone's talking about mortgages in Australia” the bank intends to develop its own Alex Bank offering.
It's removed fees as “we were focused on the cost of living when it wasn't cool,” he added.
"The reality is, what's happened with the interest rate environment is there was a whole lot of confusion in the marketplace from some non-bank lenders and others that were playing in the bank space.
“They no longer can afford to operate in the bank space because of their cost of funds. They're now operating in a higher credit environment, which means that for delivering a great proposition to customers, it's very clear in the landscape who the banks are that can offer that for them.
"Alex Bank certainly, I think, is well positioned there to offer that to customers.”
If it was easy….
Front and centre on Beitz’s mobile screen saver is the statement, “If it was easy, everyone would do it” which he said rings true.
However, he added, “I love every moment" of the challenge.
“From a tech point of view, we really started with a clean whiteboard and the team is senior bank executives from a number of our great banks around the country.”
“Knowing what we know” about what consumers are seeking and current technology capabilities, Beitz and the team began to look into “how can we design a new bank in the new age”.
“We're a digital challenger bank, but we call ourselves a challenger bank. From that point of view, we say, 'What does that look like?'
"Then, if we think about lessons from our previous careers, a lot of the complexity and cost is overlaid because, of no one's fault, you've just had systems and processes that have been patched on top of each other or connected.
“Some of our great banks still use old technology like SOAP listeners instead of RESTful APIs and different technology like that.”
Beitz said Alex Bank “had the opportunity to use an event-based architecture”.
With Temenos as its core banking provider, and also partnering with other SaaS providers, Beitz said the user and customer experience, credit decisioning engine and a broker’s digital workbench are “all areas that we need to make sure we own and understand”.
He added AWS “were very generous with their time” in the bank’s early stages of development alongside other current partners, including cyber defence company ParaFlare and ID verification business Greener.
Roadbumps and tips
Beitz on the tech front, starting up a bank is all about "getting the foundations right” and taking on board customer feedback, while understanding not everyone’s skills will be adaptable in a startup setting.
“Just because you're a high performer in a large organisation doesn't mean you’ll do well at a startup, and it probably goes vice versa from different ways as well," he said.
“We've had some really awesome people that have done some awesome work, and then we've had some people that really struggled”.
He said the organisation doesn’t “put our eyes on other people” but “we focus on Alex Bank”.
“We are passionate and committed to doing what Alex Bank is all about for our customers, and that is about making a better experience and about being frictionless and flexible to our customers.
“I learned a very long time ago, early in my career that you can't pay attention to what's going on around you because it's a distraction and often those people don’t know what they're doing anyway.”
He added the bank is not looking to take on the big four "on their core primary product” but instead wants to service customers who “have unmet needs”.
Beitz said his 13-year stint at Suncorp, which saw him hire the first “behavioural scientist or an anthropologist” helped to shape aspects of Alex Bank.
“I certainly use those core skillsets to go and build Alex. But Alex is far greater than just myself.
“Hard innovation is often hard work with not a lot of money, and I think that really drives a necessity of creative thinking and doing things differently”.
Over the next year, Beitz said he is most excited about “the impact we're having on our customers' lives” as Alex Bank moves through its next stage of growth.
“We do get customers that tell us how we help them pay off a debt quicker, or we got them into something that helped them change their lives.
“I'm keen to see how Alex Bank can continue to help improve our customers lives. Small business is an area that I'm passionate about.
“[I’m] really passionate to see how we can help these 'mum and dad' businesses that are cafes, newsagents, tradies, whatever else, that feel unloved by the banks.
“Typically, they have to go to a bank when they're working. The whole point about the digital delivery that Alex Bank's done is we interact with our customers when they're not working and it's convenient for them to interact with us.”
Beitz added the work Alex Bank is moving towards at the moment “around some of our future products is really exciting.”
“We slept in the shed sometimes when we had to work all night to pull off something in time," Beitz said.
“It's about grit. It's about being resilient. You do get knocked down, but it's about getting up again.”
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