Neo or not, all banks rely on debt: Why fintech Douugh wants to disrupt the system, not just challenge it

Australia’s neobank scene has been heating up for the past year or so, with new digital banks racing to get up and running with viable alternatives to the big four.

But, Douugh is not one of them.

The new fintech venture from Aussie entrepreneur Andy Taylor, co-founder of peer-to-peer lending platform SocietyOne, is designed to upend the entire concept of banking.

It’s an AI-powered “financial wellness platform”, Taylor tells StartupSmart, helping users to pay off debts and manage their spending, all through a subscription service.

Taylor has been building Douugh for two-and-a-half years, and the product is already on the market in the US. It should be coming to Australia next year, he says.

Late last year, the startup secured a partnership with MasterCard, and it received strategic investment from Japanese financial services company Monex in June.

Now, Taylor is gearing up to list Douugh on the ASX.

Going public

Douugh is largely focused on exporting its technology, and going public could give it the cash injection it needs to grow as fast as possible.

Startups such as Xero and Afterpay that have listed on the ASX have seen significant rewards for early growth, Taylor notes.

“The ASX is really good at rewarding early-stage technology companies and supporting them,” he says.

“We need to raise deep capital and be able to raise it quite quickly once we’re proving this out.”

For Douugh, listing is also a way of securing a governance structure early on, and “giving our banking partners comfort”.

However, it’s also about being able to secure the right kind of funding, and the best deal possible.

“Quite frankly, we can get better terms going on the listed market than we would if we were getting private VC capital,” Taylor says.

“The size of the VC funds locally would struggle to keep up with our need for capital.”

Not another neobank

Although he’s setting out to disrupt the status quo of the financial institutions, he says Douugh doesn’t identify as a neobank. Rather, it’s moving away from the traditional banking model altogether.

“I’ve always been passionate about disruption,” he says.

“How can we disrupt the business model and disintermediate the banks by empowering consumers?”

In his view, this is something the digital banks appearing in the market are missing.

“I’m seeing a lot of mobile banks trying to get licences, but they’re not necessarily disrupting the model.”

“Really, all a neobank is going to do is sell a home loan product cheaper than a bank,” he explains.

“This is the problem as a model, it’s not about being just mobile-only … We need to change behaviour.”

He’s setting out to help users escape the debt cycle. A lot of people don’t have the tools, education or time to manage their money and their debt as effectively as possible, and banks are never going to educate them, because they make their money from lending.

“If we’re going to solve this problem, we need a new business model, and that business model has to be aligned to positive financial outcomes for the customer,” Taylor says.

“Therefore, we can’t make money like a bank.”

Taylor is of the belief that the future of banking is in subscription platforms and AI. And, at the end of the day, it will be the businesses that can scale that will come out on top.

“Unfortunately, the fact that Australia is so small but also so heavily controlled by the big four [means] … neobanks cannot compete with big banks,” Taylor says.

“If we’re just here to compete on price we’re never going to win. Forget it,” he adds.

“We have to really change behaviour.”

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