When former banker Mark Bevan had an idea for technology that let lenders bid live online for a homebuyer’s business, he sought counsel from two of the most conservative bankers he knew. He trusted them to knock his idea to pieces, find its holes and tell him why it wouldn’t work. Instead, Richard Hockney and Greg Abel added their skin to the game, becoming co-founders and investors in Joust, which goes live in South Australia this week.
“They couldn’t put any holes in the idea so we were underway as three 50-year-old bankers on a fintech, digital disruption journey,” said Bevan from a meeting space at the Intersect co-working space on Wakefield Street where he is growing his new venture.
Joust uses bespoke software, developed by Adelaide’s Fusion agency, to create a live auction for a home loan interest rate. Four of the state’s most active mortgage lenders– BankSA, People’s Choice Credit Union, Bendigo Adelaide Bank and Beyond Bank are already on board – and Bevan says the speed and transparency that Joust makes possible will transform the way consumers borrow money.
There is already a timeline for expansion and Bevan, a father of two grown boys and what he calls an obsession with getting Joust going, says the board would have consumers jousting for everything if they could.
LT: What exactly is a Joust?
MB: Joust is designed to give good consumers a better interest rate outcome on their home loan. We’ve developed some technology that we’ve supplied to banks and lenders so they will see details – some profile details – that are input on our website by consumers, and based on those they will bid live back to your mobile phone or computer with the interest rates that they are prepared to offer for a standard home loan.
It will be a sort of Ebay-in-reverse auction process. The empowering part is that as the consumer, you set the time for when your auction, or Joust, ends instead of waiting potentially for bankers or advisers or brokers to come back to you.
So it essentially cuts out a middle man?
Very much so. It’s a platform built around our hypothesis that for straightforward home loans the advice from the middle man is not required. Confident and competent consumers can use Joust to obtain the best possible rate that they can extract from the market.
Who is the ideal Joust client?
We make it really clear that we are targeting three particular characteristics.
One is a good credit rating – consumers will know if they have a good credit history.
The second is reasonable equity in their home or a deposit for a new house. Banks classify that as prime mortgages, or prime home loans. That figure is 20% – so again that’s a fairly simple calculation for a consumer to make. You know if you’ve got 20% equity or deposit in your home. If you’ve got more than that then there is every chance that Joust is for you.
And the other point is a steady income. Sometimes people who are self-employed, or have wildly fluctuating income or are retired or unemployed – they will need some help to get a home loan. So we’re targeting those with a steady income.
Where did the idea for Joust come from?
When we think about digital disruption, we think about how technology allows for a better process and which low-value-add steps remain in place in the old value chain. That was probably the genesis of our idea. There are still people sitting in the middle of these value chains extracting quite a bit of value in terms of dollars, and potentially they are really only keying in data on behalf of the consumer and sending it through to software, which is making some decision about approval or price etc.
Our thinking was that the intermediary role, which is just keying data and adding limited value because advice is not required, surely that piece gets removed ultimately with advances in technology.
I took a lot of encouragement when I spoke to a CEO of a large financial institution and he stressed to me ‘home loans are not complicated. If you have $400,000 and you want to buy a house for $800,000, you need $400,000’. These are very straightforward deals for banks. Banks love those sorts of deals and it doesn’t have to be complicated.
What has happened is lenders have tried to innovate and bring in lots of features to try to get a competitive advantage – bundling of products, honeymoon rates and discounts and other incentives – and it has just made home loans really complex. As my friend the CEO says, a home loan shouldn’t be complex. It should be a straightforward product for people with uncomplicated requirements.
You had an idea and thought what next? What did you do to make Joust happen?
I had no knowledge really of technology so I sought out a technology expert and explained the idea to him and he almost chuckled in terms of how easy it would be to build the software. So that gave me a little encouragement that it would be possible from a technology perspective.
Then I sought out my two conservative banking friends to tell me why it wouldn’t work. They thought about it for a few days and within the week I had my two co founders and investors.
They (Richard Hockney and Greg Abel) are both conservative by nature and very honest as well – they would have told me if it were a stupid idea. They couldn’t put any holes in the idea so we were underway as three, 50-year-old bankers on a fintech, digital disruption journey.
This was a pretty speedy turnaround?
We got serious about it in January 2015. We clearly needed people who could bring the technology and software skills and we were fortunate enough to team with local Adelaide digital agency Fusion. The founders Damien Mair and John Chaplin were both very enthusiastic about the concept and have also become founding investors.
We engaged them to build a prototype and that gave me something to take around Australia to show to banks, and it was really well received. Banks understood the concepts and, in some instances, they were a bit taken back because it was quite innovative and really revolutionary and unique. Not all banks want to jump into something of that nature. But that prototype gave some credibility that we weren’t just an idea and being able to demonstrate the prototype to bankers and lenders was an effective visual way to explain the concept and the value proposition.
And in turn that attracted funds?
That was the second leg, as well as presenting to lenders, the prototype helped me to demonstrate the idea to potential investors and we enjoyed a wonderful run in terms of pitching to potential investors to raise equity. We often say that if consumers respond in the same way investors have, we think we are really onto something.
So after a long career in traditional banking In Adelaide, as well as Sydney and Melbourne, Joust is now your full-time job?
I’m all in. Absolutely. This has been full time for me since I finished at Westpac in January 2015. It’s all consuming. To execute on a startup, entrepreneurial-type idea there is only one way to operate and it has to be obsessive. I am very much all in and invested, as are my co founders.
Joust the name – how did you come up with it?
I never want to go through another branding exercise starting with a blank piece of paper. It is a daunting exercise, very emotional, especially if you have a team with different tastes and preferences.
Joust was the last suggestion and we’re really pleased with it. We think it’s short, punchy, easy to recall, we hope, and it reflects competition. We think it sounds like competition and our objective is to bring competitive tension to a product and a marketplace that is very competitive but the good consumer doesn’t get the benefit of that competitive tension in a lot of cases. We are looking to pass that on.
Interest rates are historically low now; does that mean that people are still shopping around for deals on their home loans? Is the market big enough or can it actually grow from here?
I’m certain the number of refinancings will grow and that means the number of settlements occurring in Australia will definitely grow. So the pie does get larger in terms of the number of transactions.
The interest rate environment is – excuse the pun, a double-edged sword. You are right, low rates might mean that the pain for consumers’ loan repayments is not as severe as it might be in a high interest rate environment, but at the same time the press coverage about interest rates is making it top of mind for people. We’d expect the low rates currently available would be a fair prod for people to think wow, I wonder what I’m paying, or if I can do better.
So refinancing will be the growth area going forward?
We think refinancing will be absolutely significant for Joust.
Joust is kicking off with mortgages. Are there plans to diversify the types of loans available through the Joust system?
We are really focused on doing something very well, so we are launching with variable rate, owner-occupied home loans, which keeps it pretty narrow.
We expect our evolution in terms of product offering to probably go down the path of fixed-rate home loans – I expect that will be our first new introduction.
We then might turn our minds to investment property loans, and after that potentially car finance. We have investors who are keen for us to turn our attention as far and wide as insurance products and superannuation as well. We often hear the phrase at our board meetings that people should be jousting for everything but one step at a time.
What does the rollout for expansion look like?
The geographic rollout is more important for us first up, than the product roll out. Our pilot in South Australia will run for four months. We want to prove up the scalability of Joust and if we do that in the South Australian market place we will confidently expand into Victoria. That will be in October. We will be adding new Victorian-based lenders to our panel to make it a more compelling offer for Victorian consumers and we’ll pilot SA and Victoria for a further three months before we intend to rollout fully nationally. And again, at that point, we would expect to add even more lenders.
Home loans are probably a good barometer of the economy and particularly consumer sentiment. What’s your take on the SA economy right now?
I always follow the confidence indexes such as Westpac’s – Melbourne Institute Survey of Consumer Sentiment and the Commonwealth Bank’s State of the States – they frequently tell us disappointingly that SA in most economic measures is trailing other mainland states. So I take that for what it’s worth but I think consumer confidence measures are crucial. If SA consumers can be a bit more confident then business will be more confident to invest and take advantage of consumer confidence. And hopefully it becomes something of a virtuous cycle.
SA has a reputation as a hard test market. How have you found starting up a tech business here?
The large banks we have worked for have elected to pilot things in SA to prove them up. There is a view that perhaps South Australians are slightly more conservative or slower to adapt to new ideas, so it is a good testing ground. It’s interesting having been on this journey for the past 18 months we’ve been exposed to the startup communities and ecosystems and the fintech startups and ecosystems in SA and also interstate, and certainly it would be no surprise to anyone that the scale of startup community in SA is much smaller than in the eastern states in particular but that’s why we would love Joust to bat above its weight and prove to be a great success. We’d love nothing more than to prove that something terrific can be grown out of the South Australian economy.
What sort of support have you had from the banks?
We’ve been lucky because of our banking experience we have had connections to get to talk to very senior banking executives and get a bit of sponsorship to ensure we get a good hearing.
In terms of who’s in – the four largest lenders in SA – Bank SA, Bendigo and Adelaide Bank, People’s Choice Credit Union and Beyond Bank are all in as our foundation lenders. It shows their focus on digital and innovation is where it ought to be and their openness to give things a go.
Do you consider that Joust is disruptive or has the potential to disrupt the industry that it is operating in?
Definitely. Everyone expects technology to disrupt those low-value activities that we discussed earlier and Joust is most definitely an example of that.
All the startup textbooks suggest that you have to start off by solving someone’s problem. We think there are a lot of problems around home loans. One is complexity and also another important problem that gets a lot of publicity with government reviews and regulators and media, is the lack of transparency in the mortgage market. Our aim is to solve that problem. How do I know I’ve got the very best home loan interest rate that I deserve? Joust will deliver that because of the transparency. You will have a live leaderboard that all the lenders can see as well, so it just isn’t skewed at all. As that lender panel grows, the competitive tension should be even higher and the end result should be more and more pure.
Finally, what tips would you give anyone embarking on a startup business?
Know what you know and be aware of the skill sets that you don’t have. So putting in place a capable team really facilitates success. Joust is fortunate to have had excellent people on the technology side soon after we began. The other key piece of advice I would offer is at some point you will need a good lawyer.
You can battle away yourself and try to do agreements and contracts and structure on a low-cost basis for only so long. If you are really serious about your business, a good lawyer adds incredible value in ensuring that you’ve got something that is going to hold you in good stead.
Bevan will be one of the panel members of InDaily’s Disrupters event later this month (details below).
To read more of our 10 minutes with… interviews, go here.
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