“Pouring kerosene on the fire”: Fintech Verteva raises $33 million to turn the mortgage industry on its head

Sydney-based fintech Verteva has secured $33 million in Series A funding, as it gears up to launch its digitised home loan solution and disrupt the “laggard” financial services industry.

Headed up by former Westpac execs Andrew Walker and Chris Lumby, Verteva is a digital home loan provider, focused on the lower-risk end of the market.

Still in the pre-revenue and product-build stage, the startup won’t have branches or use mortgage brokers. Rather, it will use preexisting data to get the process done quickly.

Traditionally, an individual would meet someone face-to-face, go through a lengthy application, fill in the details they have at hand, and then return with anything they might have missed the first time, Lumby tells SmartCompany.

Then, the data on the form is verified against source data.

“We’re changing that process up,” Lumby says.

“Where the data exists, we’re essentially going to use that data, rather than ask the customer to go and try to find it, or make a guess,” he explains.

“It’s more accurate, and allows us to create a much better experience, and removes the need for people to meet physically.”

Founded in November last year, Verteva has thus far been self-funded by the founders. But the venture has reached a “point of evolution”, Walker says.

“We needed to start writing large cheques,” he explains.

Financial services is no cheap business to be in, he adds.

“It’s a highly regulated industry, so the amount of capital that’s required to do it properly is quite substantial.”

However, the founders found themselves fundraising slap bang in the middle of a global pandemic that has shaken up economies all over the world. They were also always looking for a significant chunk of cash.

“Fundraising is never straightforward,” Walker says.

“We saw a lot of fintechs out there doing multiple smaller rounds and trying to fund their company in the short term to increase the valuations on the way through,” he explains.

“We didn’t want to take that path. We wanted to find someone who shared our long-term vision.”

As the founders were closing the round, the COVID-19 crisis was “in full flight”, he adds.

The startup’s potential list of backers was quickly narrowing, and ultimately, all of the funding came from New Zealand investment group Bolton Equities.

“We really ended up having conversations with people who could look through cycles and see the bigger picture of what was going on.”

Fuel on the fire

This business is about fundamentally changing the mortgage origination process, and the customer experience that comes with it, Walker says.

And the founders are building it at a time when everything is fundamentally changing.

“When you take the large majority of the world and put them in time out, and force them to re-engineer their lives and live them all online … it is similar to pouring kerosene on the fire of digital acceleration.”

There’s a “digital shunt” in progress, he says.

People who weren’t always digitally savvy are being forced to become digitally savvy.

“That’s changed distribution dynamics across all sectors and all economies and all geographies.”

That’s been a “helpful accelerator” to Verteva’s business case, Walker adds. And even when the COVID-19 pandemic passes, he doesn’t think people will go back to the old ways of doing things.

“There aren’t too many people who are going to be very excited, moving forward, to sit in a three-hour face-to-face meeting with a stranger, in a small room, filling in a lengthy mortgage application form,” Walker says.

“That’s just not what people will expect and it’s not what people will want.”

Banks in Australia and New Zealand have typically been “laggards” in this space, the founder adds.

“The customer experience is not world class. It’s highly manual,” he says.

“I don’t think people will tolerate that for too much longer.”

Leaving legacy behind

Having come from a big-four Aussie bank, Walker and Lumby founded Verteva in a bid to disrupt the legacy systems holding the mortgage industry back.

“We both became frustrated with the reliance on legacy systems and the lack of appetite for innovation, and most importantly, how this affected the customer experience,” Walker says.

They knew there was a better way to do things, he explains, but couldn’t make those changes within such a large institution.

“There’s too much inertia, too many sunk costs, too much risk associated with change programs and, importantly, the back-books to protect.”

The startup’s funding follows a run of successes for startups in the real estate, lending and property spaces.

Within the past couple of weeks, we’ve seen proptech startup :Different raise $7.1 million, and Sorted, a startup automating payments between property managers and tenants, raise $5.6 million.

Just last week, neobank Judo, which specialises in SME banking and started life as an alternative lender, raised $230 million, securing unicorn status with a valuation of more than $1 billion.

All of this is indicative of a monumental shift in these spaces, Walker suggests.

“Real estate and mortgages are two industries that have evolved but haven’t really had a revolutionary change in process for decades,” he says.

“What we’re seeing … is people are looking at two very large industries and being forced to ask themselves the question, ‘is that the most efficient way to go about whatever process?’”

People are starting to question how things have always been done, asking whether it could be faster, more efficient, more transparent and less costly.

“A lot of startups are picking up on those trends,” Walker says.

At the same time, as COVID-19 has forced people to stay at home, many people are doing things digitally for the first time, Lumby notes.

While they may be used to ordering takeaway and clothes online, they’re becoming a little more adventurous, he suggests.

“The type of transactions they’re doing — because they’re being forced to do them — have actually increased by multiples in terms of value, and they’re different types of transactions as well,” Lumby says.

“I can buy pretty much anything now, digitally — it’s not set aside for small value, basic items.”

Shaking up the framework

Adoption of new technologies typically follows a well-worn framework. First, you get the vanguards and first adopters. Then you get mainstream takeup, and then the reluctant and the laggards.

In financial services, as in many other sectors, COVID-19 has thrown that framework out of the window, Walker says.

“This is a once-in-a-generation shift in business models and customer interaction,” he explains.

“No matter whether you’re an early adopter or a late adopter or a conservative or a radical, everyone is being forced to sit at home and live their lives differently, through their device,” he says.

“There is no late adopter or early adopter. Everyone is being forced to do it at the same time … that’s the big difference between this change and almost any change we’ve seen in the past,” he adds.

“It changes the whole framework.”

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