Steve: I started my banking career at the age of fifteen in a small town in North Queensland. It was a great introduction to banking and the important role banks play in the community. Fast forward 30 years and I found myself in the UK as part of the senior leadership team at Barclays in a very similar environment the banks in Australia are facing post the Royal Commission. Somehow banks today have lost their purpose for existing, which is to serve customers.
At Barclays, I experienced first hand what happens when banks don't do the right thing by their customers. I also experienced the challenges incumbent banks face when attempting to adapt to the digital and data driven world we now live in.
When I came back to Australia in the beginning of 2016, I spoke with boards and executives of at least a dozen banks on two topics. Firstly the change in regulation; I was confident that they could see what had transpired in the UK post-GFC was likely to happen in Australia. Secondly, the need for digital transformation; Barclays is recognised as a leader in digital transformation amongst incumbent banks globally.
The banks found my insights interesting but also too challenging to action. I think if I had joined a major Australian bank I might have only lasted a couple of weeks. My opinions were strong on what was likely to happen and what needed to be done, I would most likely have been considered too much trouble! Instead I decided to take a different route - I joined the board of a peer-to-peer lender and invested in a few Fintech startups.
Then one day I bumped into an old St George colleague of mine, Luke Bunbury, who is now my Co-Founder of Volt Bank. Like most businesses, the Volt Bank idea started by putting the world to rights over a bottle of red and a pizza!
Luke and I both agreed that the future of banking was digital with clear examples of new entrants in the UK market such as Monzo, Starling and Revolut. The barriers to entry in Australia were incredibly high, even if we had the significant capital required, the chance of ever getting a banking licence was remote. So, we just parked the idea and got on with life.
A day I vividly remember is May the 9th 2017. I was watching the federal budget on TV, Australia’s Prime Minister, Scott Morrison, the Treasurer at the time, announced key changes to the Australian banking regulations. He called for an open banking review, announced the BEAR (Bank Executive Accountability Regime) act, the Banking Levy and most importantly for us, the restricted banking licence approach. A similar approach to phased licencing in the UK made it possible for Monzo, Starling and the UK neo bank revolution to get off the ground.
I didn't sleep that night and wrote what was to become a business plan. I met with Luke the next morning and we agreed to commit to a six-week feasibility study to assess the viability of building a neobank in Australia. We reached out to nine other colleagues to ask if they could help. By June 2017 we made the decision to form Volt Bank and all nine are still members of the team.
People warned me that building a bank would be very difficult. But it is much, much harder than that!
We applied for a restricted banking licence in October 2017, were granted that licence 7 months later in May 2018 and consequently granted a full banking license in January 2019. We are unaware of any bank; even multinational banks being granted a full Australian banking licence in less than that time. Whilst it has been challenging, it has been an amazingly rewarding experience.
"Being awarded a banking licence is an extremely difficult and rigorous process, and so it should be."
Steve Weston - Volt Bank
First you need a deeply experienced board and management team in place. I am regularly asked for advice on how to start a neobank and get a licence. Most of the people who are thinking about building a bank I meet come from technology or M&A backgrounds. The harsh reality is they will struggle to get a banking licence and will likely burn through any capital they raise unless they have all the ingredients in place.
We have met with people who have started the process of a restricted license and then pulled out because of how difficult it is. Before anyone starts, I would encourage them to speak with people at Xinja, 86:400 and Judo Bank.
The execution risk of any startup is high, but in building a digital bank, the risk is extremely high. Without a banking licence, you can’t conduct business. You need all your technology in place, an experienced board and significant amounts of capital. It is a huge investment before you can even sell a product or service.
There’s no secret. We have worn out a lot of shoe leather! I think our proposition is compelling. The UK is a comparable banking market to Australia and if we look at the digital banking scene there, 1 in 4 millennials has an account with a neobank, all in the space of approximately three years. Awareness and growth is increasing at an exponential rate with people looking for a genuine alternative to the incumbent banks.
Cloud Technology and data analytics enable pure digital banks to provide a superior service at a much lower cost, which is obviously an attraction to customers and investors.
The Royal Commission has helped raise awareness that the traditional banking model isn’t working for many customers, and alternative solutions are required. We don't expect customers will simply switch banks because of the Royal Commission. However, research shows that Australian millennials are the most likely millennial group on the planet to switch and the most worried about their financial future. While mum and dad may have grumbled about their bank, they seldom changed. Millennials think and act differently, loyalty is no longer a key element in the decision process.
Investors hear our story and it makes sense to even the most skeptical of fund managers. Now, some might want to see runs on the board before investing. But many have invested on the strength of our story, the strategy we have in place and the background and experience of our management team and board. The fact we have delivered on timelines, especially getting a banking licence, has instilled a lot of confidence in the investor community.
It has had some influence, but we have looked at many neo-banks all across the world to see what they have done well and what we can do better. We have opened accounts with them and spoken to founders where we can.
For 600 years banking largely has been done the same way. You go to a bank branch, get a deposit account or loan product and once the exchange happens you are left to get on with life. Our customer research indicates people want a bank that understands what they are trying to achieve in their lives and help them along the way. We call these ‘journeys.’ Customers want a bank to assist them in achieving outcomes in a more effective way than has been possible in the past.
Rather than just providing a savings account, Volt Bank seeks to understand what it is a customer is saving for and helps them budget, save and develop habits to get there. The Volt app will analyse spending habits and monthly living costs and provide real time prompts when a customer is over spending.
Customers are telling us that they want even more than this. If we can in some way save them money or provide access to a better deal, then they want to hear about it. Customers today expect banks to provide them with suggestions on how to save. A way would be to offer a better deal on non-bank products like utilities, insurance and mobile phone plans. Volt Bank’s key point of differentiation is to help customers in this more holistic way.
It would be naive of Volt Bank to think we can compete against multi-billion-dollar corporations. The major Australian banks have 80% market share, so there is plenty of opportunity for Volt to capture some of that market with direct customer acquisition.
People immediately assume Amazon, Facebook, Google etc. will be the biggest threat, and we recognise that the tech firms may potentially want to offer banking products to their customer bases. However, while large tech firms may have the capital required to become a bank, it is also comes with a lot of pain and regulatory scrutiny, and detracts from their core business. More often they look to partnerships as we have seen with Apple and Goldman Sachs.
Volt Bank has three partnerships announced to date, one of which is PayPal that has over 7 million Australian users. In the coming months we expect to announce other partnerships with businesses with highly engaged customer bases, which are looking to expand their services. We have put in place a business model, technology and experienced people to provide a platform for partner banking. It is a different approach, but we think the market globally and particularly in Australia, is ready for it.
Currently there are 120 full time and contract staff. In 12 months’ time, we expect to have around 200 people. Volt Bank will never employ the number of people a major bank does. By adopting a scalable model with the help of automation and technology we will be able to keep our head count low. However, machines can’t do everything and when it comes to customer contact, we feel it is essential customers deal with humans when they need to. This is why customers of Volt Bank will get to deal with highly skilled customer service representatives.
Yes, and no. We have roles that you would find in any other bank; treasury, risk, cyber security, compliance and so forth. Then we have the creative and tech teams. Designers, engineers and creatives are all on one floor and it is a different environment. There is also a startup hub which is essentially our lab area.
There is a balance between being a bank and tech startup, with a lot of respect between the different teams. Everyone in the business knows that without the banking and risk discipline, we wouldn't have a banking licence, however that we're not going to become successful by operating and thinking like a traditional bank.
And that's why we have recruited people from different industries and from different countries, people at the top of their game who have a burning desire to transform the way banking is done.
The culture of any organisation is formed from the top of the business. I am fortunate that I love people, love customers and I am a bit of a sticky beak. I try to say good morning to everyone I see each day, and goodbye when I'm leaving to those still in the office.
I know everyone by name, I get to know a bit about them, and I want people to feel comfortable so they can speak with anyone in the business about anything, positive or negative. We get together regularly as a complete team and discuss challenges and achievements, communicate which decisions have been made and why we prioritised those decisions. It is a very open and collaborative environment.
It is critical we invest in our people. We work hard to ensure everyone at Volt Bank understands our purpose and why we go to work every day. We set clear expectations as to what is expected from each team member,and we talk regularly about any mistakes that may have been made to learn from them. We want our people to feel they can be their true self when they come to work.
Coming to work every day is a lot of fun. It doesn't mean the work isn't hard and it doesn't mean that everything's perfect. But we are building something unique, the culture feels more like an elite sports team trying to win the championship than a business at times. That level of commitment, character, drive, determination and skill is the kind of culture we want at Volt Bank.
The original nine people who helped bring the idea of Volt Bank to life with Luke and myself have been the key. Almost all of our hires to date have come from our networks. When we formed Volt Bank, we had founding members in the UK, Singapore and the USA. We have been able to tap into some of the best talent in the world.
We get a lot of interest from people approaching us direct. We assess talent on a combination of technical skills, attitude and cultural fit. Typically, highly talented people will come into an organisation and they want to do a diagnostic for a few months, see what's going on, and then make decisions on what needs to happen.
Because we were growing so quickly and because there is so much to do, we can't afford that luxury. We need people who can fly the plane as we are building it. What do I mean by that? We value talent and expertise, but our people have to adopt the lean startup mentality of building, learning and fixing along the way. And that is a very different way of working to traditional banks and corporates. Even highly talented people can find a new environment challenging so it is about finding a balance while people get used to our way of working. But not everyone can or wants to work this way. So, we are very particular about who we hire and why.