In this edition of The Unicorns Podcast Justin Kelly talks with Carl Hammerschmidt, CEO of Joust.
For a transcript of the full conversation between Carl and Justin, scroll down!
Justin: Welcome to another edition of the Unicorns Podcast. This is a podcast series featuring business leaders, motivators, innovators, and general go-getters. Well, today on the unicorns we're talking home loans, interest rates, mortgage brokers, and the Australian housing market. It's an interesting time in the market there's a lot of speculation about the future direction of interest rates. A big decision from the RBA is coming next Tuesday, and there's general unease in the broader property market. Especially with inflation running high. Carl Hammerschmidt is the CEO of Joust. Joust is an online real-time home loan marketplace seemingly going from strength to strength and I'm keen to hear more Carl welcome to the program.
Carl: Thanks Justin great to be here.
Justin: So, Joust great name by the way. How long have you been in the hot seat of Joust?
Carl: I’ve been at Joust now for about two and a half years and I guess in that time we've really invested hard in the business and in taking it to market both from a consumer perspective and also from a lender perspective, just as it's a classic two-sided marketplace. It'll it allows Australians to put their mortgage on the market in the same way that other marketplaces work around real estate or around handyman’s jobs or trade services or whatever. Joust connects consumers who want a new home loan with the right lenders, and as he says, we work on deep data insights and real-time bidding from lenders to customers.
Justin: So, let's get into the details how exactly does Joust work?
Carl: So, Joust is we've got two products on our platform, and both of those products serve I guess what we see as being separate use cases from a consumer. We're here to make sure that the right home loan is offered to the right consumer at exactly the right time. And I guess we're here to disrupt that sort of price discovery customer journey that everyone sees on the internet right I mean nine out of ten Australians, now search for their home loan on the internet. It's the channel of choice with regards to how people discover home loans? How people discover pricing? How do people connect with lenders? And it's the channel that people want to be able to be sure that they're getting in touch with the right lender. At the moment you've got a really confusing onerous process for a consumer to go through, you've got all the comparison sites, you've got all the mortgage brokers, you've got all the lenders, you've got all the new digital lenders coming in, and it's really difficult for consumers to be able to find a home loan that they know is suited to their particular the borrowing requirements. So, the way Joust works is that we will capture up to 20 I guess data points or information points about a person's home loan needs and about their personal finances, and then the platform will connect the customer in real-time with the right home loan and the right lender that fits that particular profile.
Justin: So, if I’m a homeowner and I’m looking to refinance what is the workflow that I go through as that tire-kicking exercise? Where I think well maybe I need to look at a sharper rate or different terms more flexibility. What are sort of the process that I go through to get out of the other end?
Carl: Sure! So, I mean the way you might do it currently Justin is you'll go around all the different comparison sites, you'll look at the right type, you'll look at the rate tables, you'll see HSBC at 1.98 at the top of the table, you'll inquire about that because that looks like a really sharp rate, you'll have no idea whether you qualify for that, whether that product is right for your profile, whether it suits your particular needs. A couple of days later, and that the lender will get back and say look sorry Justin you don't qualify for this but how about this and this. There's a lot of unmet expectations you're going down rabbit holes and it's a generally poor customer experience. So, for you to understand the details around one of the biggest financial decisions you're going to make in your life. So, the way it works with Joust is, as I said, we've got two products our first one is called Joust Live Auction, which is it's a classic reverse auction scenario. So, you'll come into our platform, and you'll enter as I said up to 20 data points around some demographic information. Then also I guess some financial information the size of the line you're looking for, the problem, income spending. But based on that information then the panel of lenders that we have on our platform will be able to bid for your business in real-time. So, they and lenders who are on there are able to choose the types of customers that want to see because obviously, lenders specialize in integral types of customer profiles. So, they'll be able to filter the type you know that they're specifically the customers that your profile fits.
So, once you've put your auction live, you'll start getting bids from lenders and then you can start to assess all of those different products that come online, you'll get the bids in real-time we'll notify you when the bids come in and you can lean in and engage with the lender to find out more about the product and the different features that it's got based. So, working that way and...
Justin: Presumably the lenders are under beating each other trying to win your business.
Carl: Absolutely, it's a transparent competitive process. Whereby the lenders are leaning in to get your business. So, firstly because of the information you put into the platform, you know that the loans that you're being offered suit your particular profile, suit your particular circumstances, and you also know that because the lenders are competing with each other to win your business. That you're getting the sharper the sharpest rates you can. So, I guess putting it really puts the power into the hands of the consumer rather than the other way around. Where you're generally going to your bank manager or going to different lenders to ask what they've got for you.
Justin: So, what have you got.
Carl: It turns the process on its head and it puts the power into the hands as a consumer.
Justin: And how long Carl does that auction process normally last.
Carl: So, the customer can sit their auction for one to three days. So, if you the use case for life doesn't...
Justin: Drag out for weeks right.
Carl: Exactly right I mean that the lenders are compelled to get back to you immediately. If they want to win your business, they not only have to have sharp rates and sharp prices and the right home loan products that suit your profile. They also have to have good service levels right. So, that the lenders that are on the platform know that they need to be proactive, they know they need to be engaged, and as I said, the consumer can set their auction for one to three days. Depending on how long you'd run like to run the process and depending on how engaged you'd like to get into that process. Then at the end of the auction, you're able to declare the winner of the auction.
Justin: It's over. Yep, I've found my... and is that right if or from that lender offering whatever rate it is. Is that then binding? There's no like wiggle room or sorry I didn't quite have authorization is that there's certainty around that initial rate that you're offered.
Carl: The data that the customers put in and I guess the offers that the lenders put forward are indicative. Obviously, you still need to go through the verification process.
Justin: Yes, okay.
Carl: In application with the lender because in the name of responsible lending that's how it's going to work but that if you put inaccurate information, you'll be sure that the products and the rates that you're getting back, are other products and the rates that you're eligible for and that you will know that you satisfy. So, from that sense, it really cuts down time, it cuts down uncertainty and it really cut you know makes the process a whole lot simpler and easier for the consumer.
Justin: And what sort of lenders are on your panel?
Carl: Because everyone says oh, we've got all the lenders, we've got 80, 100 lenders I'm keen to know some details of the lenders that Joust is working with sure. So, we look at Joust as an open marketplace right. So, we work with all the different I guess direct lenders intermediaries, brokers, Neo banks, digital lenders, online brokers, and so on so. We see we're a broad church and I guess the beauty of our platform is that we work with the full breadth of the market. So, we've got mortgage brokers on the platform, we've got as I said direct lenders sort of traditional banks mid-tier banks, we've got credit unions mutuals, we've got the full breadth of lending partners and the beauty of working across both the broker channel and also the direct lender channel means that we're able to offer up to90 of the home loans, that are available on the Australian Market. Which is we believe that is the breadth and depth of home loan products that no one else in this space can really offer.
Justin: and is it true that Joust could cater for obviously people of all circumstances? Where if you're a salaried employee with a regular monthly income, you might fit into one basket, but if you're a self-employed trade, where your income's a little bit lumpy obviously home loans are a little bit different there. So, do you cater for all aspects of the mortgage world?
Carl: Absolutely, as I said before we see ourselves as an open marketplace and the beauty of the platform and having that breadth of home loan products and breadth of lenders on the platform means that it can cater to all the different I guess home loan requirements that are out there and all the different profiles that people might have I know there are lenders that specialise in self-employed, there are lenders that specialise in, I guess those particular circumstances, there are lenders which specialise in, I guess the high end of the market as well. And so, I guess the beauty of the platform is the kept the data that we capture and the way that the platform then allows the lenders to select the types of consumers that they can bid for and lean into and compete for. Means that as I said we're getting the right products to the right customers, we're able to cover the breadth of the market both in terms of consumer requirements and also that the home loans available.
Justin: I like the fact that you put the customers through that process first. So, you're verifying them it's a curated experience. So, at the end of the funnel that this is, it's verified, the facts are real, and I imagine both the customers and the lenders appreciate that.
Carl: Absolutely, it's I mean, this is the, I guess the value proposition for lenders is that the digital environment is equally I guess onerous for them to be able to build a portfolio of borrowers and be able to manage risk effectively right because particularly for the broking segment. The Joust platform allows them to target the types of customers that they really want to build their business with it'll as I said it allows them to filter customers by you know they might specialise in eastern seaboard customers or they might be based in WA based on that they can filter the types of customers that they want to see and they can target that specific cohort. Which means that yeah okay the customer acquisition for their process, for their business, is much more effective, and they're able to I guess really fine-tune the way that they target the types of consumers that they can build their business with.
Justin: So, I was going to ask about it no doubt the customers would probably like it in the sense that you've got all of these lenders competing for their business and trying to outbid each other with better services, better rates. What do the brokers think of the live auction functionality?
Carl: All right look once again for a broker a business that's looking to grow their pipeline that's looking grow their business potentially bring on new lenders, potentially scale up's a really strong way for them to be able to target customers to be able to build that pipeline and to be able to get I guess surety around that their business growth and business development over time they as with all markets that the lending market can be lumpy. You go through famine at times the industry has been going through a feast in the last couple of years but I mean brokers also need to plan for the... I guess the times where it's a little bit leaner and they need to make sure that they've got that strong pipeline of borrowers coming through and they need to make sure that they've acquired those customers in really cost-effective really targeted ways. So, platformJoust really allows them to do that and to manage their pipeline effectively to meet their business requirements right. If they want to build and scale and invest, then they can be assured that they're able to target the types of customers that they need to do that.
Justin: I’m talking with Carla Hammerschmidt the CEO of Joust. Carl is there anyone else in the market offering this reverse auction that Joust is offering?
Carl: No, not currently. We believe that Joust is a really unique proposition from that perspective we think it's an absolute, it's the only platform that offers live and dynamic pricing for consumers and it's the only platform that I guess as I said before turns the customer experience on its head. Where you have lenders competing for your business and leaning in to engage with you, in a way that what you're being shown is relevant for your borrowing criteria and your borrowing needs. The other platform that I’ve the other product that I referred to earlier that we've got as part of the platform is what we call Joust InstantMatch.
Justin: And yes, I’m keen to know about that. What is Instant Match?
Carl: So, the use case there is really for a customer who immediately wants to understand what home loans are out there. That meet their particular requirements. So, it's for a customer that wants to do it a quick search and get up to three products that they know broadly fits their profile and get connected to a lender straight away. So, I guess the onboarding or the workflow for Joust Instant Match is that once again consumer comes on board, they it's a cut down version of the I guess the data entry process, we capture around 10,10 data points, we do a quick SMS verification to make sure that it's a real person and that no one's receiving spam and such. And then we immediately connect the that consumer with the three home loans, we were immediately returned searches, we called the lender leader board of the three products that are the most suited to that particular profile. And once again that that search query is run across the thousands of home loan products that we've got in our database. And so, the consumer knows that it's a fulsome and really robust search across the market and a few of the home loans that suit their needs. So, the consumer will immediately get connected with three lenders, they'll have might have broker with a CBA product, they might have Macquarie bank with their product, and they might have broker's ED with another product.
Justin: It's a bit of a mix, and you leave it up to them to decide obviously.
Carl: Absolutely, and those three lenders will know that your profile meets their criteria they'll be immediately notified that you're looking for a loan, on that basis and they'll lead in and be in touch with you immediately and what we see is being I guess the real benefit of being connected with up to three lenders is that once again they know that they're competing for your business. So, they have to be sharp, they have to lean in and make sure that...
Justin: On their game.
Carl: Yeah, make sure that their service levels make sure, that their product offering and make sure that their engagement with you as the customer is as you said on its game because they've got two other lenders to beat to your business. So, we really see I guess that as I said that instant match experience as being a great alternative for the consumer to as I said that that comparison site experience that's what you're seeing on the right tables and what you're seeing at the top of the leaderboards there is basically the link be...
Justin: Vastly different.
Carl: Well, it's what the lenders have paid for. So, what you're seeing at the top is the lenders that have paid the most to the comparison site to be displayed. There the loans that you're getting and the lenders you're getting exposure to through justice that match are the ones that best suit your particular profile.
Justin: So, if you wind the clock back say 10 years, I would presume a lot or a majority of the mortgages being written in Australia would be through the big four, the major lenders, the bricks, and mortar lenders but obviously that has changed with the advent of the internet, online sites, startups. What are you seeing with respect to the mix of loans that are being written Carl between the big four, the majors who would have had you know 85 percent maybe 90 to today? What's your anecdotal evidence?
Carl: Look the big four are still hugely dominant in terms of I guess the market share and the and the loans that get written I think on the top my head that's they're still around70 to 80 but I think it's becoming a really disrupted market and it's a market which is right for disruption and as you said there are... well, firstly there is I guess a huge shift towards the broker channel, I mean brokers are now 60to 65 percent of the way that home loans get written in Australia now as opposed to direct to lender. Their panel of lenders are literally in the hundreds right that they're able to offer and in that mix, they'll have as you said, I guess all of the new non-bank lenders that are coming into the market. All of the new digital banks, and digital, the Neo banks, and the digital lenders that are coming into the market and I guess a lot of the what they call the white label products from the broking aggregators as well. So, there is a much more diverse array of products than ever before for consumers to be able to choose through and you're starting to see that shift away from the big four into some of that more diversified product set and we can see it happening through the platform quite often consumers will want to go with a big full product because they trust the brand, they know the brand, they feel safe, but also similarly that though a lot of consumers are driven by rate or driven by a service level or driven by another number of other flexibility or whatever exactly and we'll see them moving towards I guess some of those non-traditional lenders if you like to call it that.
Justin: So, in terms of what Joust brings to the market are you also catering obviously, for refinancing but are you seeing some first home buyers coming through the platform as well?
Carl: Yes, so look oh and it's fascinating to see the way that I guess the consumer demand moves based on I guess the border economic environment with the first home buyer schemes that have been out there in the market, we have seen a surge of new first homebuyers we've seen a surge of build and I guess a surge in buy style loans as well, but I think most recently with the really uncertain environment which we've got coming down the pipe. We're starting to see that really strong shift towards refinance people I guess as you mentioned before with inflationary pressures the cost-of-living pressures the looming rate rises it's all anyone's talking about at the moment, and we're seeing that behaviour come through in consumers. They're looking to see what sharper deals that they can get they're really starting to pay attention to the, I guess the dollars and the cents when it comes to their repayments particularly.
Justin: So, based on that because there has been a lot of speculation about the future direction of interest rates inflation, the inflation figures this week hit 5.1 percentI think that caught a lot of people by surprise and it's really only over the last say two to three months that the economic headwinds have surfaced and a lot it's reached that sort of punter level where people are now actively talking about a shift in the housing market. So, what are you seeing Carl through the inquiries the inbound inflow work through Joust that can point to some trends in the market?
Carl: Look I think we as I said we're really seeing that that shift towards refinance where people are looking to see if they can lock in, I guess that the historically low rates that they can for as long as possible like to really start to well to really put a cap on I guess their expenditure levels over the next couple of years as we move into a very uncertain period. I guess what we are seeing is also what we think signs of I guess what you'd call mortgage stress or financial stress as well and people trying to head that off in advance through that those refinance actions, I think we work with a business called digital finance analytics and they've got a lot of data that we share data across the businesses and analyse the market and according to their data there's already 40 of mortgage households which you could really define as in mortgage stress or in financial stress and that's a lot of households and then if you look at adding another say half a percent interest rate rise on that you're potentially adding up to another 150 000 households that could be impacted by that mortgage stress and that means that they're either under duress in managing their current payments or that they're actually behind in their payments. So, that's they're quite stark trends and they're I guess they're really quite worrying indicators I guess this early in the cycle.
Justin: Do you think that there has generally been certainly in Australia a set and forget mentality around their mortgages. I’ve got a loan I don't like it but it's there and there's not a lot of general interest in switching because of the burden some paperwork and all of the rigmarole that goes into actually refinancing certainly that's been there in the past. What are you seeing there do you think that that we still have a largely a set and forget mentality or people more actively thinking no I need to be shaking things up and getting more out of my lender?
Carl: Oh, look absolutely, I mean I think the whole principle of Joust being founded was to I guess help consumers get through that um what we call customer inertia right home loans applied for a new mortgage as I said it's one of the biggest financial decisions you'll make. Once you make it because it's so difficult, because it'sso onerous, because it's so confusing. The tendency is to just put it in the bottom drawer right.
Justin: I've done that okay.
Carl: And it's like I guess that the purpose of Joust is to make it simpler, to make it easier, and to make it I guess provide a lot less friction in that, I guess in that experience of looking at your home loan challenging your current lender, seeing what's out there and potentially shifting if you think you can get a better deal. That we're all about I guess reducing the friction and bringing down the customer inertia in that making it, easier making it simpler, and really driving them to seek a bit of deal I mean for many years the RBA and the treasurer have referred to I guess what they call the loyalty tax right and that's the amount of excess mortgage repayments that consumers are paying to the banks. Because well which is the differential on guess the deal that they should be getting or the differential on the amount that they should be paying and that's literally in the trillions of dollars a year I mean if you look at.
Carl: I mean at the bottom of the rate cycle. If you looked at, I guess loans that were over four years old.They're potentially paying up to half between half and one percent more than they potentially should be that's tens of thousands of dollars over a year potentially and its hundreds of thousands of dollars over the life of a loan.
Justin:I was going to ask that. So, the life of a loan whatever it is 30 years 25 years. What's your rule of thumb if there is one? I'm obviously not stepping into financial advice here but how often should people be actively shaking up their home loans and looking at what else is out there? Is it every couple of years? Is it every five years? Have you got any thoughts on that?
Carl: Oh, look I think particularly in this volatile market I thought it would be wise to go back and see what's out there and see what office you can get. every couple of years with well with anything else there's no harm in keeping your current lender or your current supplier on their toes. I mean it works like any other financial transaction that you might want to undertake, you want to make sure that you're getting the best price and the best deal and there it's there are literally thousands of home loan products out there, and to make sure that you're getting the right one. It does take a lot of work and it takes a fair bit of application and as I said Joust is there to make that simpler and make it easier and I think in the future as I guess the open banking system starts to come online. Whereby consumers can potentially have lenders it can opt in to have lenders share their financial data between them that'll bring down the friction even further that'll make it much easier for consumers to be able to move between lenders. It'll make it much easier for consumers to be able to swap financial service providers in general and in that scenario there's no reason why a consumer wouldn't be looking to shift every you know 18 months or so potentially if they can get a better deal.
Justin: So, obviously the area in which you're operating the Joust is operating it's a very competitive landscape, you've got the big banks, you've mentioned you've got the comparison sites, you've got the marketplaces. So, where are you looking in with respect to Joust's future. What's the blue-sky Carl? Where would you like to take the business? And what are some of the future plans to how to create a genuine point of difference in the market?
Carl: Yeah look I think on that point of difference piece um as I was saying before we I guess we see ourselves as just disrupting that either that customer journey that goes to the comparison sites and then gets lost in amongst a whole lot of products that they don't know that they qualify for or I guess providing an alternative to going individually to a whole bunch of direct lenders without any view of whether the rates that you're being offered and the products that you're being offered are the best you can get. So, as I said we see ourselves being able to provide not only really deep insights on a customer and the type of home loan that uh that they can potentially qualify for but also the breadth of the market. So, if you look at some of the online lenders or the online broking businesses. They're all able to offer consumers products based on quite a deep view of their financial profile but they're limited by the banks that they work with or they're limited by the aggregator panels, they're only really able to offer maybe 20 to 30 to 40 of their home loans on the Australian market. Joust our vision for the business is that any borrower can access I said as I said up to 90 of the home loans that are on the Australian market and no matter what your profile. If you're eligible for a home loan you should be able to find something that's suitable for your particular needs. And so, in that sense we do see ourselves as kind of in the future as the go-to marketplace for Australians. When they think about sourcing a new home loan in much the same way that you've got the big marketplaces for realestate or buying cars or whatever else we think that Joust has the potential to be able to provide that scale and provide that service and as I said be the go-to destination for Australians. When they think about sourcing a new home loan.
Justin: Fantastic to catchup with you today, Carl, remember the name folks Joust it is the leading marketplace for home loans in Australia and certainly a company to watch in the future. Carl all the best and uh we'll watch that space with much interest particularly next Tuesday with the pressure on the RBA to see what they do thanks for coming on to the show and all the very best.
Carl: It's a pleasure being here thanks very much for the time, Justin.