Avenue Bank is aiming to become the first port of call for businesses looking for a bank guarantee as it looks to tear up the norms for such a product.
Nicolas shares the regulatory obstacles and product development challenges encountered by Avenue Bank. The journey began optimistically in 2018 with hopes of a swift launch, only to be halted by a suspension of issuance of new licences by the regulator due to the uncertainties of COVID. These and other setbacks prompted Avenue Bank to shift its focus, prioritising the build of its tech platform while awaiting regulatory approval.
Avenue Bank's journey has seen them face up to a global pandemic as it worked through uncertainty to bring its innovative bank guarantee product to market, despite the challenges along the way. From navigating regulatory hurdles to pioneering groundbreaking solutions, Nicolas Parfait, CIO and the Avenue Bank team have built and redefined the banking experience for Australian businesses.
Innovating bank guarantees
Avenue Bank embarked on a mission to revolutionise the traditional bank guarantee process, driven by a commitment to better serve Australian businesses.
"We had a vision to innovate bank guarantees and help Australian businesses," Nicolas explains. "Bank guarantees are an unloved product. They haven't changed in a very long time. It's a grudge product for big banks. They have to offer it, but they don't focus on it as it’s not a priority for them. We wanted to concentrate on helping the SMEs in Australia’s business environment, they are unloved and we can help do something about that.”
Avenue Bank targets businesses in need of office spaces, warehouses and retail shops. The existing process for obtaining a guarantee can take four to six weeks, often requiring branch visits and dealing with paper-based guarantees.
However, at Avenue Bank, the team completely reimagined this experience.
"We can issue a bank guarantee in as little as 24 hours, " Nicolas adds. Avenue Bank developed a modern digital application form coupled with a highly automated orchestration process in the backend. While further optimisation is always possible, Nicolas and the Avenue team prioritised the most impactful improvements first.
All members of the commercial leasing ecosystem have responded positively to Avenue’s innovative bank guarantee for commercial leases. Many were impressed by the speed and seamlessness of Avenue Bank's process, especially those who had previously dealt with traditional banks.
Nicolas adds: "We've even seen where some people are applying six weeks before they need it because they are used to it taking that long. However with Avenue the application form is super quick to complete as well as the required checks, It's a bit of a shift in getting businesses to realise that it can be that quick and simple. We are also offering them digitally as well as paper based for those that request a paper bank guarantee. We found a niche segment in the market that was ripe for innovation.”
Cloud-driven efficiency
Avenue Bank operates with a much leaner team, leveraging cloud providers, like AWS and partners, which also utilise cloud-based solutions.
"You can launch and run a bank with a really small and focused team due to using cloud platforms and SaaS based partners who also operate in the cloud. It also allows us to keep our costs down whilst having a secure and scalable platform," Nicolas continues.
Nicolas highlights the effectiveness of leveraging cloud-native security tools and practices, particularly in the context of building Avenue Bank's infrastructure on AWS. By partnering with Lacework, Avenue Bank integrated security controls across its entire stack, from build to runtime.
This comprehensive approach enabled it to conduct infrastructure and code scanning during the build process, ensuring compliance with various standards such as CIS.
Additionally, real-time cloud security posture management allowed the bank to identify and address critical issues promptly, reducing alert fatigue and improving overall security.
"It's really helped lowering the alert volume and knowing what you need to work on," Nicolas says.
Building and launching Avenue Bank in a pandemic
Nicolas describes the journey of building and launching Avenue Bank as a "rollercoaster ride”. Despite the challenges, his positive outlook helped him navigate the ups and downs typical of a start-up.
"You've always got limited runway, you don't have an end of supply of money, so you are always working with what you've got," Nicolas explains.
Amid the turbulence of the COVID-19 pandemic, Avenue Bank faced unprecedented challenges that tested its resilience and adaptability.
As the pandemic swept across the globe, Avenue Bank found itself stuck in an unprecedented purgatory as it looked to move forward in a world about to be stuck indoors. The onset of COVID-19 ushered in a period of uncertainty and upheaval, compelling the bank to confront daunting realities head-on.
When the world was in lockdown, Avenue Bank faced significant hurdles. Tough decisions had to be made, including reducing workdays to manage cash burn, as APRA suspended issuing new licences for banks.
Nicolas says: "We had plans to launch in 2020, then Covid hit. We had to make hard decisions and adjust our plans multiple times over the following few years. There was a lot of uncertainty, so we needed to find a way, which we did when we finally launched in March 2024."
Nicolas highlighted the necessity of reducing operational costs and Avenue Bank making tough decisions amid the uncertainty surrounding the licencing process and global economic conditions.
Despite the adversity, Avenue Bank remained focused on its goal of establishing a customer-centric banking experience for small businesses, emphasising adaptability and flexibility in its approach.
Establishing a foundation
Throughout this unknown period, Nicolas underscores the importance of laying a strong foundation for the bank's cloud infrastructure.
At this time Nicolas's team concentrated on building the foundations of Avenue Bank’s cloud-based architecture.
"We had time and it was low-cost and crucial for getting things running," he notes. “Working with AWS solutions architects allowed for research and refinement without immediate pressure. If COVID hadn't happened, we might have relied on external consultants, leading to a knowledge void once they left.”
Avenue Bank established its cloud-based platform on AWS, a task Nicolas took on himself. “This wasn’t something that I would have done on my own but due to the regulatory delays, it was about being as productive as possible. That’s what I love about startups, you do whatever is required. Once we had come out of the period of licence suspension, it meant we had an enterprise grade cloud platform from which we could build our technology on. As AWS is a consumption-based service it meant we were able to keep those costs to a minimum by using the right sized infrastructure.
This hands-on approach allowed the team to control the process and make necessary adjustments as needed. Emphasising the importance of striking the right balance of building custom solutions and using off-the-shelf platforms, which may have limitations and hefty annual fees.
“I've used some of those platforms and they can be quite constraining, don't necessarily let you do everything, and they've got expensive annual fees and you’re not necessarily getting value out of them until a few years down the track, but have spent several hundreds of thousands of dollars in the meantime,” Nicolas adds.
"You can build something straightforward and low-cost, and it's effective until you reach the right scale.”
"Tech is never permanent,” he continues “I always cringe whenever I hear someone say the phrase future-proof. You need to balance building what you need now whilst having some flexibility for the future, but you are never going to be able to cater for every conceivable scenario. We’ve built a modern, secure and scalable, best of breed technology platform which allows us to innovate and implement changes quickly. We’ve tried to strike a balance with solutions that are cost effective and work for us now, knowing that these may need to be replaced in the future."
Regulatory hurdles and product development
The selection of SAP Fioneer as Avenue Bank's core banking provider was driven by its cloud offering, facilitating core banking operations as a managed service. This decision not only reduced internal resource requirements but also ensured compliance with regulatory standards. Nicolas underscores the enduring nature of this relationship, highlighting ongoing efforts to enhance collaboration and operational efficiency.
Despite the challenges posed by licensing uncertainties and evolving regulatory criteria, Avenue Bank remained resilient. Nicolas stresses the importance of interpretation and negotiation in navigating the ambiguous licensing process, emphasising the iterative nature of regulatory compliance. Through strategic decision-making and a steadfast commitment to product excellence, Avenue Bank successfully launched a product that met regulatory standards and addressed the needs of its target audience – the commercial leasing ecosystem.
"Now, we find ourselves at the starting line, focused on building our brand presence and gaining market share,” he concludes. “Our aim is to become the go-to bank for any business in need of a bank guarantee. We strive to deliver a superior customer experience through continued automation and innovation."
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- Nicolas Parfait