Of the 50 possible deployments we can do in a day, we can push five of them out to customers who get an iterative, improving application every single day. The most deployments we have done in a day is ten. At the moment, we're sitting at an average of six.Dom Pym - Up Bank
Dom speaks to Dexter Cousins about their journey to becoming Australia's first ever mobile phone only bank.
Dom Pym: The idea for UP was born out of frustration. As an entrepreneur, I have a tendency to solve problems, problems for me personally, my family, my mates. And turn it into a business.
The story of UP goes back five years. My business partner and I were looking for the next business opportunity and raising capital. We met with lots of people and got talking to the CEO of Bendigo Bank who were out to tender for a new mobile banking system. Ferocia were there to raise capital and ended up building the platform for Bendigo. That's how the relationship with Bendigo started.
The platform was a huge success and won multiple awards, but nobody knew who Ferocia, people just assumed Bendigo built the platform.
The success of the Bendigo platform led to work with one of the major Australian Banks. A project in Asia, to build a digital bank across 10 countries. We spent two and a half years building this thing and it never got into a customer's hands. We worked with people in San Francisco, Hong Kong and Singapore, and spent a lot of time travelling. Then a new CEO arrived. The strategy changes and the Asia project is scrapped. On Friday, we were talking about the success of the project. The following Monday, the whole thing was off a right. Ferocia had dedicated two and a half years of resources, people and energy into it.
The executives we worked with on the project moved to another Big Four bank. They called and asked us to work with them on a new digital bank they had planned for Australia. Ferocia spent 18 months on that project. Again, the product never got into customers' hands. By this stage, we had spent four years building digital platforms and never got to see anything in the market. As you can imagine we were deeply frustrated.
The first digital bank in the world was started by an Aussie, Joshua Reich with Simple. We also noticed what Brett King was doing with Moven. And we were inspired to build a truly digital bank here in Australia. We thought ‘stuff it. Let's build our own bank.’
There was just the small problem of raising 100 million and getting a core banking system. Not impossible but very unlikely. So we decided to go down a different path, partner with a bank. In 2016, there were no RADIs. So, we decided to look for partners and it was an easy conversation to have with Bendigo. The partnership already worked and there was a lot of trust between us.
But, you can't just borrow another banks license. We spent about 18 months putting the legal structures and contracts in place. Finally in October 2017, UP went into production, Australia’s first cloud-hosted bank, with Google Cloud Platform.
We ran UP for a year, initially with our own staff, then Bendigo staff. Next, we extended to friends, family and a small beta testing group, about 1500 people in total. We resolved any issues around regulation, compliance, risk, security, cloud hosting before the official launch of UP Bank in October 2018.
Dom Pym: By February 2019 UP Bank had 50,000 open accounts and 30,000 unique customers (some people open multiple accounts). We are growing at between 500-1000 new customers per day. We had anticipated decent traction being first to market and having the power of Bendigo behind UP.
In January, we conducted benchmarking against Australia’s banks. The data indicated UP Bank as Australia’s third fastest growing bank, behind CBA and ANZ, but we had overtaken the likes of Macquarie, ING, NAB. ING announced record numbers in customer acquisition last year, something like a 47% increase.
Dom Pym: That is the secret sauce recipe everyone is looking for. How do you get rapid growth and brand recognition, without spending a truck load on marketing, advertising, and promotion?
The strategy is proven with other digital banks around the world. Word of mouth, a strong referral network and happy customers are the key channels for growth.
There’s been minimal paid digital promotion on Facebook, Twitter, Instagram, Snapchat, Google and so on. Social media is a very successful channel for us. It's not so much that we are spending on advertising to customers. We use social to communicate with customers.
Twitter is a fantastic tool to communicate with our customers. Not just me, our Head of Product, Head of Technology, Head of Design and the rest of the team are active on twitter. Twitter is an amazing tool for growth and we haven’t spent a cent on advertising on the platform. Facebook, we did spend money on, and we were able to acquire customers.
You wouldn't think that a bank could acquire customers through Facebook, Snapchat, Instagram. We ran basic digital promotion campaigns, that created a viral effect. It was fascinating to watch people engage differently on each social media channel.
On Facebook, tens of thousands of people write about UP to their mates. They tag their friends in a post, it is like an endorsement that goes viral. With social media, we can acquire a thousand customers a day, through a single social channel without doing anything because of the strength of the brand. People love it. How many people in the world wear T-shirts, hats, badges, stickers and merchandise for their bank?
Experiential promotion and marketing works really well for us too. We'll do industry events, like the Fintech Summit where we might do a panel or a key note or whatever.
But we have had most success sponsoring community events. We have sponsored university events, the Australian Design Industry Awards, the Pause Conference in Melbourne. Probably our most successful event was PAX, which is a computer gaming event where they have 100,000 people attend. We missed Sibos because we were busy at PAX!
We decided rather than attend an industry event like Sibos, Money 2020 etc we would try a gaming event. PAX is the world's biggest gaming conference. People dress up as their favourite video game character and play video games. You wouldn't think a bank would be there, but we were signing new accounts on the spot, giving away T-Shirts, hats, merchandise. What really drove new customer sign ups was challenging them to a game of Mario Kart.
Our development team built software to track each game in real time with a leader board. People at the event would then compete against each other, it was a big hit. We even had the Mario Kart world champion come and take part in the challenge, two of the UP team members actually beat him.
It was a fantastic event to win new customers. Within a few days 100,000 passionate gamers not only knew about UP Bank, they had played a game of Mario Kart with the Founder, the Head of Technology, a Developer. Everyone at the event thought of UP as a totally different digital bank that lived in their world, in their community.
The UP website now has the word banking crossed out. We have replaced it with living. Banking is just a utility, It is something that should be in the background supporting life. We met one guy at PAX who used the round up function on our app to save for his ticket to the event. It is such a beautiful story, as here was someone passionate about gaming, using our software to realise their dream of attending the worlds biggest gaming event.
Dom Pym: Today, 29 people. It's always been a goal to remain small and agile. UP is a nimble team of like-minded people, we are more like a family than a team. We set out to be the first in the world to launch a fully operating digital bank with less than 30 people. It is amazing what the team has achieved.
Monzo, Revolut, N26, Simple, these companies have hundreds of staff. UP was built on the hypothesis of using technology and automation to keep a digital bank below 30 people. I am not sure if we can remain below 30 people forever, but if we could, that would be awesome.
"People are the secret sauce to the success of UP."Dom Pym, Up Bank
The culture, the family that we've created, the way that we bounce off each other, the way we work together, the way we collaborate and help each other, is the reason for the success of UP. And that extends to the relationship with Bendigo.
Success can be distilled down to recruitment, the way we hire people and the caliber of people we hire.We place a huge emphasis on skills within the team. Everybody is multi-talented, no-one is doing a single specific role. Our people have an inherent ability of our people to learn on the job.
So when people are sick or when people are on leave or when we lose a staff member, we can still deliver across marketing, risk, security, compliance, technology, operations, cloud hosting. Every outcome we need to deliver for our customers can be met by not just one or two or three people, but by everyone in the team.
Most of the team has one degree of separation. Everyone that works here has worked with at least one team member before. We've got 10 people who have worked here for more than five years, five people who have worked with me for 10 years. Then there are those whom we’ve worked with in the past who keep in touch. One person came back to work with us recently. They left 10 years ago, joining Square in San Francisco. He had been working as Head of Technology development, moved back to Australia and came back on board.
Dom Pym: UP is a collaboration between a technology company (Ferocia) and a bank (Bendigo and Adelaide) Working with an existing bank to develop new financial products is not an easy process. When we looked at other digital banks like Simple in the US, they launched quickly through a partnership with BankCorp.
But when BBA bought Simple they spent the next two years also transitioning core banking systems and didn't really innovate or create new product. Monzo partnered with Wirecard, then when they received a banking license, decided to build their own core banking system. We believe UP Bank has a strategic and competitive advantage by not having to build a core banking system. But if we had our time again, we might want to...
And that's purely because of the amount of effort involved in building product in a legacy core banking system. In our view, a core banking system is essentially a database of debits and credits. If you treat it in that way, innovation is possible outside of the core system using it solely as a regulatory ledger.
We hear people in banking say, you can't build a digital bank on top of legacy systems. Well you can because we've done it. But, I would still seriously consider building a core banking system if I had to start all over again.
Dom Pym: People have commented that the Apple Card app has similar functionality to UP. So, I find it quite flattering that the greatest tech innovation company ever is following in our footsteps.
I say this a little tongue in cheek. However, we work closely with Apple here in Australia and done a lot of first-mover stuff with them. Apple Pay integration, Apple Watch integration, push notifications with merchant identification.
The model Apple has chosen, partnering with Goldman Sachs, is similar to the UP model. Apple is focused on the customer experience, a technology company delivering a superior customer experience. I will go on record and say Apple have the ability to acquire more customers than any bank in history.
It's all about the customer experience and the delivery of the service, Apple has nothing to do with banking. That is all done by Goldman Sachs. Even if the interest rate is not attractive, it doesn't matter, it is going to be the easiest card in the world to use and that's what matters.
Neo Banks all over the world are selling financial services in the same way it has been done over the last 100 years. Create a financial product, price it, then sell it to consumers. What consumers want, in our view are products to power their lives. Let’s say you want to buy a car. Do customers care if there is a savings product, insurance product, loan product, transaction account all powering the service? Or do they care about the experience? Apple will totally nail the customer experience.
The interest rate may be high, but customers might not even pay interest, if the service helps them pay off the debt within the interest free period.
Anyone in banking who thinks that Apple Card won’t make an impact because it is just a credit card geared to millenials is perhaps naive and missing the real threat.
From day one UP has positioned itself as technology-led banking versus banking led technology. I don't know whether there will be other banks around the world, position themselves as a technology company. We set the goal of five deployments per day. Our entire banking platform can be deployed in 45 seconds. A full regression test of every single device, every single operating system, every single-use case in the entire application is completed within 26 minutes. We can do that twice in an hour, which is 50 times every day.
Of the 50 possible deployments we can do in a day, we can push five of them out to customers who get an iterative, improving application every single day. The most deployments we have done in a day is ten. At the moment, we're sitting at an average of six.
I'm not certain of other tech companies in any industry in the world that can talk about that level of iteration and innovation.
The card product announced by Apple is very similar to the card product we have in development. But we will launch before Apple does in Australia. Eventually we will offer credit cards, mortgages, share trading products because we're operating under a banking license.
We have experienced rapid growth in terms of customer numbers, but at the same time we have been developing a product roadmap. We get hundreds of inquiries from customers every day through social media, through the support channel with product ideas. The team came up with the idea to release a public roadmap communicating to customers what is coming next and when it is coming.
We call it the Tree of UP, we think is quite unique, certainly in banking, and even in technology. The next 12 months of product development is publicly available. You can click on the different branches and see what we're currently working on. The roadmap is our way of communicating to customers who we are, what it is we do and why. Because we're delivering improvements every single day customers are tweeting, instagramming and sharing these new features. We believe delivery is the best way to delight customers.
We recently launched a pull to save function. Some people have said The Gamification of saving for a whole new generation of Australians has been nailed by that one feature. It’s an amazing compliment.
Internally, there were reservations about launching the ‘pull to save’ feature. How would customers react? Should we be focussed on delivering traditional products, joint accounts, credit cards, home loans?
Fair question. But for the team at UP, being able to change the decision making and saving habits of an entire generation is a more lofty goal.