Banking on Australia's SMEs: the birth of a challenger

In 2014, David was at the height of a highly respected 30-year career as a senior executive in Australia’s mainstream banking sector, with top roles at NAB, ANZ and Macquarie Bank under his belt, when he and long-time colleague Joseph Healy – after years of conversation about what they saw as the growing market failure in the banking of small to medium-sized business in Australia – decided to take the first steps in building a new specialist bank aimed solely at serving the country’s SMEs.

With what they saw as the progressive industrialising, dehumanising and “productisation” of the banking offering to SMEs in Australia, the pair sought a return to the provision of banking to SMEs as it used to be done, with personalised access to the kind of relationships, funding and financial services advice that SMEs need in order to thrive.

Realising their unique position of extensive combined experience within the sector to address this issue, the pair explored international markets and identified the model that could best meet this unmet need. The result was Judo Bank, described as “Australia’s only challenger bank purpose-built for small and medium businesses”– the term “challenger bank” referring to specialist contemporary banks challenging the sector’s dominant players by offering more progressive personalised and client-centred services.

David recalls the sector landscape at the time, and the forces that inspired Judo Bank’s establishment. “In the six or seven years leading up to 2015, Joseph and I were both working at NAB, and we saw up close the growing market failure in the way banking services were being provided,” he says. “This was later highlighted in the Royal Commission [into Misconduct in the Banking, Superannuation and Financial Services Industry, established in 2017 with its final reported tabled in Parliament in 2019], in which the antipathy towards Australia’s ‘big four’ banks was laid bare. The oligopoly was powerful, and SMEs had little to no real alternative.”

The pair saw an opportunity to “return to the craft of small-business banking”, where the banker knows each of their clients and their businesses personally, is always available, has the authority to make decisions relating to their funding, and can do so quickly.

To ensure they got the model right, David and Joseph travelled to the UK to learn from established challenger banks, which at that stage had begun emerging in the UK but not yet in Australia. David recalls being impressed by how open their UK counterparts were to sharing their experience. “They were incredibly generous with their time, given that there was nothing in it for them,” he says. “It really felt like we were kindred spirits, and over time we came very clearly to the view that there was an opportunity to establish a similar model here.”

And so in 2015 David left NAB to join Joseph, who had left the year before, in building Judo Bank – named after the concept of “judo strategy” as outlined in a 1999 Harvard Business Review article by David Yoffie and Michael Cusumano. Granted its banking licence in 2019, Judo Bank has since lent more than $8 billion to Australian small businesses – an achievement of which David, the bank’s co-founder, former co-CEO and now non-executive director, is justifiably proud.

“We really do believe they are the backbone of Australia, and this gives our work a genuine sense of purpose. And when you step out of the mainstream and do something that’s completely aligned with your personal values, it’s a really different feeling, which you don’t fully realise until you do it.”

It’s a feeling that led him to co-author (with Joseph) a book titled Black Belt: A masterclass for start-ups and entrepreneurs, which shares “our real-world story of building a bank from scratch in Australia, distilled into a series of practical lessons for those with an entrepreneurial flame flickering”.

The same commitment to “paying forward” his hard-earned experience is the driver for David’s very active and generous relationship with the Business School, where his own career began with a Bachelor of Economics in 1985. He regularly shares his expertise as a guest speaker, and mentors and coaches those with a kindred entrepreneurial spirit to pursue their own goals. Unsurprisingly, Judo Bank shares these same values, offering Business School students opportunities to gain invaluable real-life project experience with a unique multi-award-winning specialist bank that was purpose-built from the ground up.

While the past decade has seen a profusion of opportunities for innovative entrepreneurial start-ups, David believes the next decade is going to be even better, and says he is looking forward to nurturing some of the country’s emerging talent.

“It’s not just about the theory – it’s actually about learning from people who have done it, and this is where I feel I can contribute. I get a lot of value out of it myself – I enjoy being around really bright, motivated, creative people. It doesn’t tire me; quite the opposite – it really fills my tank.”