Meet the Founders Disrupting Australia & NZ's Banking Monopolies

Welcome back to TechMates. Today, we're diving deep into the world of fintech. Even if often overlooked, Australia and New Zealand are great places to build fintech companies. You have much more access to regulators, a relatively wealthy customer base, and a lack of competition between bigger financial institutions. We'll hear how pure frustration led to a digital bank designed to rival TikTok, how building the pipes of open banking is breaking the legacy vault mentality, and how a platform is making sure someone with five bucks has the exact same investment opportunities as a millionaire. Let's start with Dom Pym and his story of turning absolute customer frustration into a banking revolution. Let's go. Let's go and do it and see what happens. Ideas are worth like jack [ __ ] absolute jack [ __ ] Like if you can't execute, there is nothing.

Just take that initiative to actually take whatever crazy ideas that they might have and just try to see what comes of it.

Don't be afraid of ambition. Chase it, love it, wrap your arms around it, and and say it out loud.

don't know any better, and they will just get up and give it a shot.

That's why we were the first to get to the top of Mount Everest.

Go to dream that ultimate dream, like what is it that you ultimately want to do, and it's all achievable. So, from what you just said, I imagine that Up came about because you were incredibly frustrated with the banks. Is that a fair assumption?

100%. And and and worse than frustrated. Like as a customer, you can be frustrated, but we had a software company that we're building software for banks, and we never intended to build software for banks. Our intention was to get people that we've ever worked with in the world on all these crazy projects and get them in a room together in Melbourne so that we could build a software company, and we didn't even know what we were going to do. We wanted great people in a great environment working on great [ __ ] We didn't know what the [ __ ] was. And we stumbled into banking because we met with the managing director of Bendigo Bank, which is the fifth biggest bank in Australia, and there's a big gap between the big four and then the fifth. And some people say the fifth biggest is Macquarie, some will say it's ING, which is a Dutch bank, and some will say it's it's Bendigo.

It really depends on how you measure it, but regardless, they're a really huge bank. And we met with a managing director, and we were trying to raise money for our software company. We weren't trying to build banking software. And he asked us if we could build banking software, and of course we said yes. And so we we we uh we did we couldn't and we didn't, but we we said yes, and we and we won a tender, and we end up doing it. And so and so we started building banking software, and we were frustrated as customers, yes, but there was something happening in the world. There were digital banks launching all around the world, and we were in Melbourne doing software for the fifth biggest bank, and we were building their mobile and internet banking software, and we did that for 6 years.

And they paid us a lot of money, but we were really frustrated that we couldn't deliver the features, the capabilities, the real-time data, all the things that we wanted to do. We couldn't do that in a bank environment. And so we started working with the big banks. We worked with two of the big four banks. We started working in Asia, started building digital banks around the place, because there was this trend happening where Australian founders were leaving Australia and starting digital banks. So, Bank Simple was the first digital bank in the world, and it was founded by an Australian, Josh Reich. Monzo was founded in the UK, one of the co-founders, in fact one of the two co-founders was an Australian, Simon

Simon Taylor is German, right? Yeah. And then and then and then you've got another company out of the UK, I just the name just escaped me, but another digital bank started by Brett King. And and Brett's brother, Troy, worked at our software company. So, we had all these people Josh went to university with my best mate's girlfriend. I sort of I knew these people, and they were out there building digital banks, and here we were frustrated as customers and frustrated as software developers building banking software. And we were like we were constrained that we couldn't do what we wanted to do. And so that frustration boiled over, and we said, "You know what? We're just going to build our own bank." And then we started looking at how do you build a bank?

And you can't build a bank because you got to have a license, and to get a license you need $100 million in reserve, you need $100 million in runway, you know, that takes many years to to go through all the process. You got to buy big systems from SAP or Oracle or IBM and you know it it was a it was a real nightmare to sort of think that you could build a bank, but I could see my peers building digital banks overseas and I'm like why can't we do it in Australia? So, when you said it was frustrating, yes it was frustrating, but it would be on frustration. It was like an innate desire to build something better for ourselves firstly and then everyone else. How could you make something that was so cool everyone wanted to use it everyday and would love it.

One of our very first hires was this guy Anson who uh is from New Zealand um he's from Wellington and he I call him like my right hand man or my chief imaginer. Up is essentially his brainchild. So so he was we we hired three people on that first on the same day. One of them was our chief architect, one of them was our chief imaginer Anson and one of them was our head of um platforms like a system operations. And so if you have someone that can do the architecture of the the platform and someone that can imagine the future and build the user interface and then someone and the features in the product and then someone who can build the infrastructure that runs it, you sort of have all the ingredients in the first three people that we hired to to be able to build this bank. And Anson is so awesome which Up is literally his brainchild.

He and I used to say that we pay him to imagine the future. Before I was saying how Australian and New Zealanders are totally awesome. Well, Anson's one of those ones that I've never come across a product person as smart or as future looking or as capable. Like he will he will develop a prototype himself of something that is imagined in his brain that no one else can understand. And then when he shows you a demo that he built on the weekend, everyone goes so obvious in hindsight. Oh, that's amazing. But but he's the guy that literally thinks of it and then builds it. So so Anson and I locked ourselves away and and and sort of imagine what a bank could be if we built it something that people would love. And then we hired a head of design and I remember Dan, he now works at in a Facebook and Instagram and and WhatsApp and doing payments and all sorts of cool stuff.

But, uh Dan took did a whiteboard session with me and Anson. And and he wrote on the whiteboard um where we were in the journey of being the best in the world for engagement. And he's like, "Over here is Instagram and Twitter and TikTok and all these amazing things that people are interacting with, engaging with. And people put those apps on the home screen of them of their mobile phone, and they use them 20 times, 50 times a day. Banks were measuring usage once a month. Your active customer reviews are once a month, right? If you use it once a day, you're like a Uber customer, you're like a super customer. And so, Uber's a good one. Uh Uber, Airbnb, these sort of companies. Yeah, they were they were dominating in the app space. And so, he wrote them on the whiteboard, and he said, "We're all the way down here, and if you do like a J-curve, they're all the way up here.

Um and we shouldn't be comparing ourselves against banks. Forget about banks. The best bank in the world is Monzo, and we don't want to be better than Monzo. We want to be better than TikTok, better than Instagram, better than Uber. So, we need to build an app that is engaging. We don't need to build a bank. And and if people love the app and they engage with the app, then the banking comes second second tier." It's amazing how looking at highly engaging apps like Instagram and TikTok, rather than other traditional banks, completely changed the game for Dermot and his team. But, to build those cool modern financial apps, you actually need to access the data that is locked away inside those legacy banks. That's where Dermot comes in. He's building the pipes, the infrastructure of open banking.

Let's hear Dermot explain why traditional banks are so slow to innovate, and how giving you control of your own data changes the entire ecosystem. For someone who's never heard the phrase open banking, can you explain in, I guess, easy language what you're building and why it matters to the average consumer? Yeah, so um open banking is a concept, right? It's the easiest way of putting it. It's the idea that your financial data is yours. That's the crocks of it. That's the the underlying piece. But, it's driven by government regulation. The idea is back in 2016, global financial crisis occurred, banks started getting wobbly everywhere, and people's money was stuck in places and they couldn't move it around. And so, the European governments stepped in and said, "Actually, going forward, you don't get to lock a customer in.

They need to have the opportunity to move and move their data with them cuz at the end of the day, the reason people stick with banks is because it's bloody difficult to move, right? You can't easily decide, "I want to swap to this other bank." Cuz you get paid into that bank, and you've got bills that are going out of that other bank, and essentially, it becomes a core part of your your kind of financial life, and so, it's not easy. So, the EU came up with what they called a PSD2 payment service directive. And it came under that way to also allow customers other opportunities to move their money. So, think about it, the only other way to move, right, at that time was logging to internet banking or mobile banking, do an account-to-account transfer, or pay with a payment card, right? And so, that was your Visas or Mastercards.

You know, you can go tap a card and away you go, or in those days, swipe and stick a chip in. That means customers were again locked into those services, right? That was owned by the bank and owned by the card rails and and and those are the pieces. So, the idea was, "Actually, we're going to break apart this, and we're going to let customers do what they want to move things as they need." Which was kind of innovative at the time. The UK was part of the EU at the time. They adopted this as well. They took on a a different approach to the EU, mandated a particular standard and a way of doing it, and and defined it from an API perspective. Whereas, the rest of Europe said, "Go sort it out yourselves. It's up to you." And that started this revolution in new innovative ways of interacting with data.

And so, instead of screen scraping, which was the old way to get access to data, that's where you gave somebody your internet banking username and password, which sounds crazy as an idea, but I mean, it still happens today, right? You give them your username and password, they log into your internet banking and they download all your history and then they'll give you a mortgage, right? That could stop. Straight away, you could actually go and consent to it. And anybody who's logged in with Apple ID or logged in with Google into into something, you know, you go to Netflix and it's like, you know, create a Netflix account or log in with your Google account. That is the exact same process for open banking. And so, when you go there, it says select your bank. And that's the same as finding Google on the consent list.

You go there and Google pops up and says, "Hey, do you know you're logging into Netflix and you're they're going to see your email, your name, address?" And you say, "Yep, I'm okay with that." And away you go. Open banking is the same. You don't actually have to put in your Google credentials to log into Netflix. It takes you to Google. Google says, "Do you know what you're doing here? This is who and this is what's happening." And you say, "Yep." And away you go. It's the exact same now with your bank. You get sent to your bank and your bank goes, "Hey, by the way, this mortgage service is asking for you this data for this period of time so it can achieve whatever outcome you're looking for. Is that what you're agreeing to?" You click yes and away you go. And the joy is that's it. All accredited. So, random hacker X can't turn up tomorrow and accidentally request your data.

Because that system that was set up, because it's government driven, means that everybody has a license to interact with your data. And so, for a regular person, uh you should never have to know what open banking is. That's the important key piece, right? In the same way we don't necessarily know how banks move money between each other when we do account-to-account payments or how when you tap your card at a terminal to purchase your coffee, you don't know how that works. Open banking is similar to those pieces in the background. It's what's enabling cool things to happen. But the idea is, at its core, your information is yours and you own it. Uh you own your accounts, you own your money and you own access to them. And now you can decide who has access and who you share that information. So, it's it's really it's really empowering. And what's the role that Which is playing in that?

So, we are at the pipe stay connection, the infrastructure as such that this sits under. So, in the simplest sense, if you think of banks as reservoirs where all of this information and money and all those things sit, and you think of those mortgage brokers or personal financial management apps or or another bank on the other side that's trying to offer a service to the customer. You as a consumer would go to that other provider and they would you would click buttons there and they would use our pipes, our connections, our secure end-to-end flow to make that happen. The idea being there is they don't need to be experts in these technologies. They don't need to be experts in security and governance and all those pieces to be able to offer you services.

We take away that away that burden from them and we ensure it's secure end-to-end and that way we become that core system over which these things operate. So, it's a it's a really kind of big and important part of what happens because once it's embedded, it becomes part of everybody's day-to-day. You don't notice you're using it. Right. And why are the banks not innovating on that side as fast? I mean, they could use that opportunity of the regulation for open banking and go and build this kind of, you know, log in with your bank themselves, right? What what's keeping them from doing that? Well, there's two pieces. One, they are by their nature conservative organizations, right? They are designed to keep things inside, not let things out, right? That's they got a vault mentality, right? And so, they don't iterate fast.

They can't respond to markets the same way as a smaller, more agile organizations or just organizations who are technology companies first, right? Banks are financial institutions first and they use technology to enable that. And so, technology is a cost for them rather than providers like us who are technology companies where as technology is the product as such. And so, it's very difficult for them to to be innovative in that space. It's fascinating to think of financial institutions as reservoirs and Sharesies company as the secure plumbing makes all the data flow. So now that we've covered everyday banking and the data behind it, what about building actual wealth? Our final guest is Leighton from Sharesies. He started with a very powerful vision. What if investing isn't just for the wealthy?

Here's Leighton on how they're breaking down the barriers to wealth creation ensuring that anyone can get started whether they have $5 or $5 million. So maybe let's talk about the the vision a little bit for Sharesies. So you got into this by making investment more accessible, I guess. And so that's what you tried what you achieved. So how how do you think from here? Like do you think, you know, the average sort of teenager is going to get into investing? Do you want to like help them with that? Where do you think the company's going to be in the next 5 to 10 years?

The business is to create financial empowerment for everyone. Our original vision, excuse me, uh was that someone with $5 and $5 million have the same money opportunities. That served us really well for the first seven years of the business. And then we started to outgrow that vision a little bit because once people have access with $5, they then want all the other things. The ambition is not that people will have $5. It's that they can get started with. And we've sort of broken that now. Like you ask me anything that we can invest in, you know, theoretically that's not a like you still have to build some product, but if you wanted to invest in this podcast, I could sell it for less than $5 each, you know, and a portion. We've got all those structures in place. That vision was was so good like through to even speaking with regulators and stuff as we've been licensed.

Like no one no one was fractionalizing New Zealand and Australia Australian stock exchanges, right? We're the only company still that does that. And you're talking about like how that doesn't work. Well, we're talking like, well, we said up front that what we're trying to do here is give five people $5 and people $5 million have the same opportunities. If we all still believe in that and buy into that, then we need to find a way to work. And to to the point that sometimes when we're going through those licensing processes, the people working with will spit that back at us, you know, so you don't even it's almost like they they really start solving the problems with you. Doesn't you know and there's multiple times they happen in different seats. But then we have a few different arms to our business now.

The first one the first pillar of our strategy is a wealth app that actually grows people's wealth. So that means we've got to get people we want to create a million millionaires, right? That's what we're trying to create here. So and that means you need a wider picture of wealth. So Sharesies is known for investing but we now offer but 70 or 80,000 people have their savings on our platform and then we have a whole bunch of people with their KiwiSaver or superannuation. We've got a whole a bunch of people with their insurance, their car insurance. We're going to keep broadening out these wealth app propositions both here and in Australia. And then and we've got this other pillar which is connecting companies with their stakeholders.

So we now have a huge amount of them shareholders who own businesses in New Zealand and Australia on our platform and we want them to be engaged with like you know part of this democratization is that you get the same access to information that you would if you're in the running with big institutional funds or something like that. So now we're helping companies connect with them because we think it's really great business for them. So we run things like employee share schemes and and we run a registry business which has about 700 business customers. Is that like a is like a quota? A bit like that. That's right. And people don't really think about Sharesies that much as has that been our business but being a registry is actually a core part of our product. And then the third one is productizing our technology.

That's in this one here or at the second and the third pillar are the real global opportunities for Sharesies. At the moment like last year we onboarded Fonterra Farmers for example. So Fonterra Farmers Fonterra is a cooperative that means it's owned by its members which in Fonterra's case is the farmers and dairy farmers who supply milk to it and they have to run a capital position based on a bunch of rules. And we now do that so like all the farmers can manage it on their mobile in Sharesies and stuff so that's like real this other technology aspect to it. So the future of Sharesies is like using our software at the heart of people's wealth really across it. So you're really starting to integrate all these places and getting that full picture of your wealth and ultimately helping you get ahead so that you can live the life you want. That's That's what we're Wow. That's cool.

There's um I mean, there's lots of kind of I guess criticism on Robinhood, right? For like enabling gambling rather than investing and enabling or like kind of getting people to invest in stuff that they don't understand in a way. How do you think about that? Like, do you do education around investing as well for for young people? We make a massive investment in education. It's not to say that people don't make bad decisions on Sharesies, right? Cuz at the end of the day, we have 12,000-plus options, but we really believe in choice. Rewinding 8 years when we were sitting around our kitchen table talking about what Sharesies might be, one of the options was that we were like the first sustainable investing platform that that, you know, or ethics-based or who's it like that. And among the six of us, we couldn't agree on what that would look like.

So, you think, right, we've now got close to 800,000 users of our platform. Imagine trying to support 800,000 people with ethics-based decisions or like everyone's Everyone has different thoughts and views, and we think that choice is really important. So, to your point, we we front it with education, warnings if we think necessary. Like, we have things like volatility warnings. We're trying to do much more in the portfolio space. We'll definitely move into advice for the first time with the AI tools and LLMs. You can see scalable advice that's actually good. So, it We're really heavily investing in this space. Um you know, we're taking point on Robinhood. Like, there are actually a lot of similarities between our businesses, no doubt. And actually, I think Robinhood are trying to Well, they have and have tried to democratize this world.

A lot of people don't appreciate is that their options trading business probably funds a huge amount of development for lots of other things. And maybe they haven't got that balance quite right a few times. I don't really know, and I don't spend a huge amount of time looking at that.

Do know that Sharesies has a similar or has a profile of customer that means for a huge number of people who sign up and use the platform every day, we lose money on and there'll be a point where they they go through that curve and that's at a point of wealth cuz ultimately there's a fixed cost for everything we do, you know, it costs seven or eight dollars just to get someone onto the platform through AML and all that sort of you think about what it costs to if you end up speaking to a human, most of that's not that I mean these are the things we have to cons with our own team even ultimately the purpose of the business is really strong on what we're trying to do. So we won't jeopardize that and that's why we're not in things like options and stuff right now. Thank you for tuning in to Tech Mates.

If you enjoyed this episode, be sure to subscribe, leave a review, and share it with friends. We'll be back soon with more stories of Kiwi and Aussie founders reshaping the future and disrupting down under. Until next time, keep dreaming big and daring to disrupt.