Some of the best startups are the ones that solve a genuine problem.
So when customer service becomes unacceptable in a certain industry, opportunities arise.
I recently had the pleasure of speaking to Yanir Yakutiel on my podcast.
Yanir is the founder of Lumi, and has managed to do two extremely successful capital raises — the first one in November 2018 raised over $31.5 million, and the most recent one raised $8 million.
And he’s done it off the back of servicing a market that has been largely ignored.
Yanir saw an opportunity in the post-Hayne Royal Commission climate to use the power of data and analytics to create a market-leading, consumer-focused small business lender.
After being involved in SME financing for the years prior to that, and seeing how unfulfilling the service was for businesses from the big four banks, Yanir acted swiftly with Lumi.
Yanir describes his experiences and observations of the banks:
“The banks are reasonably okay at consumer products, they do corporate and enterprise reasonably well, but this whole segment in the middle of SME — it’s not even that they don’t do it well — they just don’t do it.”
Yanir said he longed to see the great customer service he experienced growing up in Israel:
“Maybe it’s a bit of a nostalgic view, I grew up in a suburb of Tel Aviv — the bank manager was there for 30 years. Unfortunately I left Israel for a long time but I went there three years ago before I started my business; I walked into the branch (and) everyone knew me! They knew me from when I was a teenager. Relationship banking was sort of towards the end but still existed. Whereas here, it’s completely non-existent.”
Yanir pointed out how the bank managers of yesteryear can’t do what they used to do, which has created a large requirement in the market:
“Discretion of the bank manager’s (has) gone completely. They can’t lend to the butcher down the road that they’ve known, and he knows he’s good for it because he does his mortgage, he does his life insurance, he does everything. And when interest rates have come down so much, absolute profit margins for the banks have shrunk and the small-ticket items, the 50, 60, 70 grand loans for the corner shop or whatever it is — has just become unprofitable for the banks.“
But Yanir acknowledges these businesses need somewhere to go:
“There are two and a half million of those businesses in Australia; it’s about 50 percent of private-sector employees in Australia — it’s a massive sector! The more I investigated the more I found that there is a gap in the market, and then (I worked on) the process to formalize it…the exact product, how to attack it, and then I went into capital raising and raised money to start a business.“
Meeting Customer Demands: Service Expectations have Increased
Yanir says that because our expectation for service has increased, he knew he had a good shot at making a lot of people happy:
“The expectation for service has skyrocketed…there’s no reason financial services shouldn’t be a better experience.“
Automating the Boring Processess
The first step was automating annoying processes.
Yanir says customers shouldn’t have to hand over their details if they’ve already done so.
Personalising Customer Service for Business Success
Yanir adds that personal interaction is a great start, outlining his reasoning and success he’s had with this approach:
“At the moment that you have a personal interaction with someone, that personal interaction should be highly personal. And that’s to basically replicate that old relationship banking model off the back of the branch bank manager.”
James Stewart: What we can learn from “It’s a Wonderful Life.”
“The old James Stewart movie: ‘It’s A Wonderful Life’ — the guys’ the local branch manager and he knows everyone in the town. We try and do that by capturing as much information about the customer so we know a lot about them. And we try and transform that information to give a customized experience. A lot of companies try and do that with advertising and customization of newsfeeds or whatever it is — we want to do that to customize A, the product offering, so what we offer Johnny is different than we offer Bobby because Johnny’s business is different than Bobby’s. But, also to give either Johnny or Bobby the feeling that when they interact with us — all the information that they’ve provided us is available to the person that they’re speaking to; they don’t need to sell themselves again and again…”
Yanir says this frustrates customers:
‘”I’ve got a butcher shop and I’ve been trading for seven years…” That’s already done algorithmically by the system. And that not only saves time and cost which allows us to service those small-ticket transactions — our average loan size is about twenty-five thousand dollars — but it also gives the customer a customer experience that he’s not getting at a traditional bank.”
Naturally, the customers love it:
“I think more than anything that has been the feedback from our customers; they feel that they are understood. When you call the office, it’ll be picked up by a person as soon as it says: ‘You’ve reached Lumi, our hours are this and that, hello, thank you Johnny, this is Denise, thank you for calling!’ And we deliberately didn’t put a phone system: ‘For accounts dial one for sales dial two’, because the minute a customer calls any company and they get into the phone routing system, their perception of experience — and rightly so — plummets.“
When a customer calls Yumi, their file and information are all there for a staff member to speak to them accurately.
It’s a terrific strategy that’s working well for Yanir; maybe there’s an industry you could apply this to?
For my full interview with Yanir, please check out the link here.