Competition Heats up in Australia’s Neobanks, Digital Banks Market

Competition Heats up in Australia’s Neobanks, Digital Banks Market

by October 6, 2020

Since 2019, a wave of digital banks have arrived in Australia on a back of favorable legislation changes which took place in 2018. Today, Australia is home to five independent, licensed neobanks, in addition to a plethora of digital banking platforms. But more are expected to come, adding heat to the competition.

Volt Bank was the first neobank to receive a full banking license back in January 2019, after being granted a Restricted Authorised Deposit-Taking Institution (RADI) in May 2018. The startup is pursuing a partnership model, focusing on striking agreements with different businesses to amass customers and provide perks like shopping discounts, co-founder and CEO Steve Weston told Business Insider Australia.

Volt Bank

It recently announced a partnership with Microsoft to develop “Volt 2.0,” a next-generation Banking as a Service (BaaS) platform that would allow Volt Bank’s approved business partners to natively provide full-service banking and payments to their own clients. Volt 2.0 will act as an extension of pre-existing Volt Bank partnerships and is slated for release in 2021.

Founded in 2017, Volt Bank hasn’t fully launched yet and is currently in beta and live with a savings account product.

After Volt Bank, the second company to secure a full license was Judo Bank back in April 2019. Founded in 2016, Judo Bank is a neobank that specializes in business lending. Judo Bank offers tailored solutions for Australian small to medium-sized enterprises (SMEs) and was built to make it easier for local businesses to get the funding they need.

Judo Bank

Judo Bank

86 400 was the third startup to be granted a full license in July 2019. 86 400 is wholly-owned by payment network Cuscal and offers transaction and high-interest savings accounts. It is currently the only neobank in Australia that directly provides home loans via brokers, claiming a process that’s five times quicker than at a traditional outfit.

Xinja Bank was the fourth player to get fully licensed back in September 2019, after receiving a RADI license in December 2018. Xinja Bank currently offers a high-interest savings account named Stash as well as a transaction account. It plans on launching loans and mortgages later this year.

IN1Bank, formerly known as BDB Corp, is latest player to have been granted a (RADI) license in December 2019. IN1Bank is building a full bilingual neobank targeting Chinese speaking customers in Australia.

Competition heats up

In addition to these five licensed, independent neobanks, several other banking platforms operate in Australia. These do not hold their own licenses but have inked partnerships with banks, using these institutions’ permits to deliver banking services.

Up Bank is a notable player falling into this category. A subsidiary of Bendigo and Adelaide Bank, Up Bank has been around the longest since launching in 2018, a head start that has allowed it to become the biggest consumer digital bank in Australia. Up Bank counts more than 200,000 customers, according to a report by Business Insider Australia.

Other homegrown digital banking apps include Douugh, which has partnered with Regional Australia Bank and recently expanded to the US through a partnership with Choice Bank, Pelikin, a travel and money app that’s partnered with Heritage Bank and Tuxedo Money, and QPay, a student payment and budgeting app that’s partnered with EML Payment Solutions.

But the competition is heating up as at least two new neobanks are looking to launch in Australia. Hay, which currently provides a card, account and app in partnership with Macquarie Bank, has applied for a license. Similarly, DayTek is working towards a RADI license for its Infinity neobank.

In addition to this, foreign digital banks have also begun expanding to Australia. UK digital bank Revolut fully launched in August after running in beta for nine months. At launch, it counted 30,000 Australians registered on its waitlist.

Though neobanks and digital banks have boomed in number over the past few years, these have yet to gain significant traction relative to the incumbents. According to S&P Global Ratings, these combine a collective market share of less than 0.05% of system lending as of December 31, 2019.


Featured image credit: edited from Freepik and Unsplash