FSA COMMITTEE
FINTECH FRIDAYS
30th April 2021
Judo Bank brings back trust into Australia’s SME businesses
Enlisting Goldman Sachs for an IPO headed to finish in November, with a target valuation of $1.5 billion, Judo Bank has established itself to be one of the leading companies in the financial space of small to medium-sized enterprises (SME) credit lending.
Founded in 2016, by former NAB bankers David Hornery and Joseph Healy, both individuals recognised that the Australian SME segment remains as the largest segment for revenue, profit, and growth. According to Judo Bank, within the 12 tumultuous months, one in four SME businesses were unable to secure enough funding during the pandemic, even with government support available. Highlighting the ongoing gaps in lending, relationship quality that the SME businesses face from the major banks in Australia, Judo Bank seeks to offer a solution.
According to Chris Bayliss, CFO of Judo Bank, all the big banks have become industrialised, therefore all unique facets of individual SMEs are lost as only digital strategies are used to approve loans. Therefore the whole SME sector is suffering as big banks are shrinking their size of their business model since COVID hit, while Judo’s loan books are doubling. Through a more personalised and traditional relationship-based banking, Bayliss underlines, “We’ve been growing at an exponential rate and we’re lending $200 million to Australian SMEs a month.”
Starting from $250,000 loans, Judo is able to offer 3 types of products which include the normal business loan where it has flexible repayment frequencies, a line of credit with no scheduled repayments but with variable rates, and equipment loans, which allows for easy tax benefits. What differentiates Judo from the rest of the banks is it is designed and built for SMEs to be able to receive funding, with an understanding that cash flows are meant to be incremental.
In the wake of RBA rate cuts in 2020, Judo has also been recognised to have one of the highest rates for term deposits with 1.6% for over a 5-year term, where if the principal rolls over to the next term, savers are also awarded an extra 0.1% loyalty bonus. “Term deposit rates have been in free fall for years now, so it’s great to see a new bank come into the market promising to offer some of the best rates around,” said Mozo Banking Expert, Peter Marshall.
However, with uncertainty built into the market of the neo-banking sector in Australia, and neobank Xinja declaring its exit, the challenger bank has revealed that the latest cash injection of $284 million by investors such as UniSuper, Magnetar Capital, and Moore Strategic Ventures shows that there are still investors who are confident in their business model.
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Marqeta to make Melbourne its Asia Pacific headquarters
Marqeta is a multibillion-dollar card issuing fintech, enabling companies to issue credit and debit cards to employees. But not just any ordinary card, the company enables companies to customise their card programs for a specific outcome or experience, they call it modern card issuing.
Marqeta has already captured a range of clients in Australia, mainly within the buy now, pay later space, and on-demand food. Some notable companies that have built payment experiences on Marqeta’s platform include Zip, Afterpay, Klarna, DoorDash, Uber and Visa.
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An example of how DoorDash uses Marqeta is for drivers to make in-store payments. When a driver pays for any customer orders at restaurants, Marqeta’s technology allows the consumer to automatically get a message to say that their food is on its way. On top of that, Marqeta also helps DoorDash prevent fraud with Just-In-Time Funding, ensuring transactions only get approved and funded if the order and amount are accurate. This doubles up as a control to ensure Dashers are purchasing and delivering the correct order to the consumer.
Another awesome feature for Marqeta is the speed of card issuance. Last year multinational investment bank JPMorgan Chase also enlisted Marqeta’s help to enable it to issue credit cards, which automatically could be used via a customer’s digital wallet such as Apple Pay or Samsung Pay, rather than having to wait for the physical card to arrive in the mail first.
Marqeta has currently achieved unicorn status - a private company with a valuation of $US1billion or more. In May of 2020, Marqeta closed a $US150 million ($193 million) funding round from a single investor, reported by US press to be Capital Group, at a $US4.3 billion valuation. Now, Marqeta is expected to IPO this year with a market capitalisation of more than $US10 billion. We are definitely excited to watch this space of creative problem solving with the continued advancements in modern card issuing.
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The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.