The neobank revolution seems to have been on the Aussie tech agenda for years, but while we’ve seen ADI licences granted and betas launched, the whole sector is arguably still a little short of hitting its stride.
Us tech nerds may have been banging on about digital finance management, spending trackers and what ‘neo’ even means for many a month, but the concept hasn’t quite caught on in the mainstream. Or at least, not yet.
Let’s set the scene.
86 400 launched its transaction and savings accounts in September last year, and now also offers home loans. Just last week, it also launched an energy comparison service, allowing users to switch providers quickly.
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Up has also been around a little longer, having launched in October 2018 with personal and savings accounts. But, as it’s tied up with Bendigo Bank, it doesn’t share the same licencing restrictions (or enjoy the same independence) as some of the other players.
Judo Bank started life as a small business lender, before securing its full ADI licence and rebranding as a challenger bank built specifically for SMEs. This week, it’s announced it has topped $1 billion in loans.
But, it still only offers one personal term-deposit account. That said, it seems to be en route for expansion. Last year, it banked $400 million in the biggest-ever Australian funding round, and it also overtook Canva as the best Aussie startup to work for, according to LinkedIn.
Xinja was one of the last to secure its full ADI licence in September last year. And, while chief Eric Wilson pledged to hit the ground running — he said at the time the bank was signing up customers by 12.30pm on launch day — it’s still been rolled out relatively slowly.
Xinja’s bank account offering is now open to all, and the bank’s ‘stash’ savings account was launched last week. According to its website, it also has personal loans and home loans in the pipeline.
But, Xinja is also starting to make waves in the mainstream, largely thanks to its ‘ditch dad banking’ ad campaign. The Twitter response to the messaging has been mixed, with some celebrating a ‘fun’ campaign and others dubbing it problematic and discriminatory.
— Gerry Gaffney (@gerrygaffney) January 17, 2020
But hey, where a problematic ad campaign goes, conversation follows. This could be a tactic to cement Xinja in the minds of those outside the niche field of fintech.
And finally, Volt has been the slowest and steadiest of all the disruptors. While it was the first to secure its full ADI licence back in January last year, it wasn’t until the following December that it rolled out its first beta savings account.
And while Volt is still working through signing up the 44,000 people on its waiting list, just this week it raised $70 million in series C funding ahead of a planned IPO at the end of the year.
So, for those of us who have been harping on about the neobank revolution for the best part of two years now, have these early movers delivered?
There’s a sense of impatience among fintech nerds who have been waiting for neobanks to come into their own. Is it possible that by talking about the potential of digital banking early on, the pioneers have found themselves over-promising and under-delivering?
Speaking to StartupSmart, Volt co-founder and chief Steve Weston admits it’s “probably a combination of both”.
People hear about the progress neobanks are making, and expect them to enter the market — complete with all the bells and whistles — faster than is feasibly possible, Weston says.
“Building a bank is incredibly complex.”
There may have been a case of new players “being a little bit optimistic as to how quickly you could get to market”, he adds.
But, at the same time, launching with something that’s not good enough can also do damage.
“People don’t want the MVP, they want the end-product,” Weston says.
At the same time, speaking from personal experience back in the UK, it’s clear the Aussie market, and regulatory regime, has some catching up to do.
As I will tell anyone who’ll listen, I landed in Australia in early-2018 and almost immediately asked: ‘What’s the equivalent of Monzo here?’
Weston observes that even Aussies who have spent time in Europe come back raving about Revolut, Starling and Tandem — talking about them in ways that you wouldn’t usually hear people talking about banks.
“There is no doubt we were late to the party as a country,” Weston says.
But, the Aussie regulatory climate is similar to that in the UK, he says. And that bodes well.
“We’re probably four years behind the UK, and it took them at least a year after the first neobank launched before Monzo and Revolut and Starling and Tandem started to really get traction.”
In Australia, Up secured 100,000 customers within its first eight months.
“These are not insignificant numbers,” Weston says.
Now, in the UK, neobanks are starting to attract customers who are not millennials, he explains. These are people in an older age bracket, with savings, and more complex borrowing needs.
That’s only happened since the middle of last year, he says, when some of the bigger players started running TV marketing campaigns.
The UK and Australian markets are very similar, he says.
“So, that’s a very good lead for us.”