Ross Greenwood speaks to Latitude Financial Services CEO Ahmed Fahour as Latitude will be launching a ‘buy now, pay later’ service as it aims to flourish in a post royal commission environment where banks are hesitant to lend.
Ross Greenwood: Great to have your company here on Monday news going right around Australia. A name you will know there is no doubt is Ahmed Fahour. Now, one stage the boss of the National Australian Banks, Australian operations, its chief executive there, then became the chief executive of Australia Post, but then he’s gone off got quiet, but he’s reemerged with another financial services business this company called Latitude Financial Services that have been acquired by three big private equity players.
In this particular case, amongst those names, you’ll know, Varde Partners, maybe not KKR, certainly, and Deutsche Bank. Now the interesting part about this business is it’s the former GE money. Which at one stage also took over Mark Bouris’s Wizard Home Loans. The idea is given the Royal Commission into our banks and financial services industry, but also then with technology, changing the way in which financial services not only being distributed, but also in the way in which is being marketed to you.
You sense there’s a change, which is coming. Which I get the idea is why Ahmed Fahour, has become the Managing Director and Chief Executive of Latitude Financial Services. He’s with me in the studio right now. Ahmed, many thanks for your time.
Interview with: Ahmed Fahour, CEO, Latitude Financial Services
Ahmed Fahour: It’s a pleasure to be here, Ross.
Ross Greenwood: All right, so you and I have talked in the past when you were the boss of NAB in Australia. When you then were the boss of Australia Post, everybody thought Ahmed’s gone retired, he’s chilled out. He’s having a good time, he’s taken enough heat during his life. Why did you get back into this?
Ahmed Fahour: I was very happily retired. As I was there looking into our economy, our businesses and very importantly, I was watching my children. I have four children aged between 13 all the way to 24. I watched the way they shop, the way they pay for things, the way they deal with friends, and the way they transacted, and one of the things that really strikes me and I’m sure a lot of parents out there would say exactly the same thing, which is technology and the digital revolution has changed society, changed things enormously.
I want to make sure that when they’re doing all those things, they’re doing it in a safe way with the best providers and with the opportunities that we might have had. I got very excited by it and when I was approached by Varde, or KKR, or Deutsche and the three of them, and they bought this business, they wanted to create an exceptionally special financial services company that deals with millennials and younger people, but also just general population and delivered to them through technology, some of the services that they’re looking for.
Ross Greenwood: Okay, so this business Latitude, it has an Australian Financial Services license as it must have, but it doesn’t have a banking license, is that a hindrance or is that an advantage to that business right now do you think?
Ahmed Fahour: I’m very grateful for the fact that it doesn’t have a banking license. It doesn’t need a banking license, we don’t take deposits from anybody. We don’t do home loans and we don’t do big business loans. What we do is we look after moms and dads and individuals, and we provide them credit, we give them finance to support their needs to invest, to shop, to buy, to have a holiday, to invest in their education wherever it may be, but we don’t have expensive branches.
What we do is we deal with them online on the telephone. We provide all of these services in a very inclusive way. I mean, we are there to support middle Australia, and I believe many of our major banks have pulled back and they’ve pulled back big time. Credit is not flowing into the economy, people are not getting the loans that they need.
Ordinary Australians are finding it very difficult to deal with the banks. Therefore, we are providing a service now, we’re very excited by it, as we have for many years for those people who are not the big, high end of town, but who are just trying to get on with the ordinary course of life. We’ve got some very attractive offers out there.
Ross Greenwood: Okay, before we get on to those offers, I want to go back to one thing. The Royal Commission, you’d have been as much as student of that Royal Commission observing it and seeing what was going on. As a former Managing Director of the National Australia Bank in Australia, were you sad, were you disappointed by what you saw and heard inside that Royal Commission?
Ahmed Fahour: Of course, what ordinary–so even if you weren’t working, even if you weren’t running the joint, listening to some of the things that have been happening in the last four, five, six, seven years, you start to wonder how could this possibly be? I think Australians have lost faith in a lot of institutions. I think, large institutions one thing, they’ve lost faith in government, and they certainly they’ve had real question marks even about religious institutions.
There’s been some behavior by large institutions that have really put people off and made them question who they trust and who they don’t trust. I’m very saddened by that by a lot of Australians. The question is, is how do you provide service support that if ordinary Australians trust and they believe are getting good value for money, and are being treated with their data and their information in a respectful way, and I’d like to think that Latitude, as formerly was a GE money is probably one of the most inclusive lenders in this country and I’m really proud of that.
We don’t push some people aside, well, you’re not good enough, or you don’t have enough. We actually work with people. We don’t take security of their mortgage or their home, we actually provide a really valuable service. Today, more than any other time, we need it right now, because banks have pulled back. Personal loans available in Australia in the last two years has fallen 40%.
We’ve gone from being the fifth biggest personal loan lender in this country of ours. Fifth, to now we are number three. We’ve grown from 8% to 13%. I wonder to myself if they’ve pulled back, yes, we’re doing our bit. But gee, there must be a lot of people searching and looking for this access to finance that they’re not getting.
Ross Greenwood: You’d have also researched GE money itself, it had its share of scandals. They’d been inappropriate lending, they’d been very high-interest rates. I mean, is this one of the things that does come when you’re providing the filling of the gap that the banks have now left open in terms of personal finance? In other words, if you take on some of these risks, do you therefore ultimately get the stories which aren’t necessarily so flattering to the organization?
Ahmed Fahour: Look, we’re in the business of risk, that’s what we do. We lend money. The difference is, we’re not lending people’s money that they’re put into deposits. We’re borrowing the money from capital markets and from our shareholders, and we’re lending them to consumers. We’re not giving them back their own deposits as such. What we’re doing is we’re taking access from the wholesale markets our institutions and saying, here you go, but there’s no question, no matter what you’re doing, nobody can ever throw stones if they live in a glasshouse.
Whether you’re government, whether you’re a big institution, whether you’re a bank or you’re a big company. What you’ve got to do is turn around and say, what is the philosophy that I care about? What I care about the most is doing the right thing by my staff. If I look after my staff, I know that they will look after the customers, and there’s no question about it.
If you do the right thing by your staff, they take care of the customer, the shareholder will be taken care of. If there’s been some wrongs done, then it’s up to the institution to say, you know what, I did wrong here, and I’m going to fix it. That’s no problems at all.
Ross Greenwood: Okay, so you’re also wanting to take on Aftepay, which has been one of the fastest-growing companies on the stock market in terms of revenue in Australia over the past three or four years, but the interesting part about this story, I think, at least is your experience at Australia Post as its chief executive, transitioning from an old letters business into basically the digital economy, where you’re delivering parcels and knowing about those online businesses as well.
As a result, you know retail from that experience, this is putting together the finance side of your past, with your Australia Post side of your past to create a separate business. Is that what that was about?
Ahmed Fahour: Well, it’s very interesting, you say that. Latitude GE money acquired, a lot of your listeners may remember AGC or AVGO Finance and National Credit, they’ve acquired all those businesses actually. A lot of people don’t realize this whole buy now pay later, it was invented here in Australia. It wasn’t invented by Afterpay, it wasn’t invented by any of the banks or anybody. It wasn’t even invented by Latitude.
You know who it was invented by? Jerry Harvey. Jerry Harvey invented it in the ’80s and he did it to help his customers to buy their couch, to buy their TV and he gave them almost the old fashioned Laybuy plan, pay a bit now and a little bit over time. We came along through AGC that we had acquired and we partnered with organizations like them and others and we said let’s create an interest-free product that you can pay over one year, two years, three years even up to five years. No interest and it was a great service.
Ross Greenwood: Okay, as a bank can I jump in there? Does it worry you sometimes that some consumers, the need to consume now and rather than save the way to buy something? The have now, the buy now generation, does it trouble you as a banker?
Ahmed Fahour: Well, you know something, it troubles me deeply when organizations lend money because whether it’s for $100 to buy a set of sneakers online somewhere or it’s $1,000 to buy a couch, okay? Or a beautiful TV set or something like that. It bothers me when whoever is providing that credit doesn’t treat it as credit, so this is the difference. We treat this as a loan, so we would check that the person is able to pay us back. This is the big difference. Whereas some of these new players that have come on to the market don’t do a credit check. As long as you’ve got a name, an address and a happy, you can have a thousand bucks.
Ross Greenwood: There you go. Ahmed Fahour. The managing director and Chief Executive of Latitude Financial Services. Quite an amazing history as a business person. Let’s hope maybe an impressive future as well. Ahmed Fahour, I appreciate your time.
Ahmed Fahour: It’s great to be here, Ross.
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