Neobanks challenge Big Four’s ‘sneaky sh*t’

Australia’s digital banks are shouting from the rooftops about their interest rates and taking a swipe at the Big Fours' tactics.

interest rates

Australia’s neobanks are shouting from the rooftops about their interest rates and taking a swipe at the Big Four banks.

Each of the digital banks has released its rates for savings accounts and the figures are likely to make pleasant viewing for retirees looking to maximise earnings from that recommended emergency stash in the bank.

And, as several of the neobanks point out, their savings accounts don’t come with a list of conditions.

Business Insider (BI) reports that as of late last week, all of the newly arrived neobanks – digital banks that are app based and have no physical branches – have released their savings account interest rates and all outstrip the Big Four banks.

Xinja is the latest to receive full Australian Deposit-Taking Institution (ADI) status from the Australian Prudential Regulation Authority (APRA). Its new savings interest rate has been set at 2.25 per cent, putting it on par with fellow digital banks 86 400 and Up, which is wholly owned by Bendigo Bank. Volt, which is rolling out accounts to a 40,000-person waiting list, says it will pay customers 2.15 per cent when it goes public in February.

Significantly though, says BI, Xinja and Volt’s accounts have no attached conditions, meaning customers do not have to make a certain number of deposits or avoid withdrawals to get the top rate.

That, says Volt founder Steve Weston, is a real point of difference between the big banks and the challengers.

“What percentage of the big banks’ customers actually get the higher interest rate consistently?” he asks. “The figure would be appalling. They would say they’re not breaking any rule, but they would never answer the question.

“Yesterday’s banking you could get away with that sneaky shit. The banking of today says if you know the customers are getting a poor outcome, even if you’re not breaking any regulations, you need to stop. We can lead by example on this, and we can make a lot of noise.

“Retirees are sick of seeing interest rates fall, naturally they will say, ‘It looks like the offer is good; is my money safe?’ and we have the $250,000 government-backed guarantee.”

Competitor Xinja agrees with Volt sentiments. CEO and founder Eric Wilson said in a statement: “There’s no introductory period, no minimum deposit and no mandatory monthly top-up [with us]. There’s no tricks or smoke and mirrors to the offer; put your money in, and get a great rate.”

BI points out that 86 400 requires customers to deposit $1000 each month or its top rate falls to 0.4 per cent.

Up is in a similar boat, requiring five or more card purchases per month, or its rate falls to 0.5 per cent.

Volt’s Mr Weston says the banking industry needs to rebuild trust in the wake of the damning findings of the royal commission.

“Right now, people trust banks to not lose their money,” he says, “but, bloody hell, they can’t trust them to look after them beyond that.”

What you see is what you get with Volt, he says. “By this time next year, it could be that all introductory rates on all savings accounts are abolished.”

BI says the Big Four banks have ways to conceal low rates.

It uses NAB as an example. The base rate on all its savings accounts is 0.11 per cent. Its ‘iSaver’ account lifts to 1.44 per cent as an introductory four-month rate. The ‘reward saver account’ offers 1.5 per cent indefinitely, but a single withdrawal will take it back to 0.11 per cent and you need to make at least one deposit every month – and it can’t be on the last day of the month.

BI says all the big banks follow much the same formula.

A NAB spokesperson describes its rates as “competitive”.

“We regularly review pricing on term deposits and savings accounts to ensure we continue to offer competitive rates while responding to market changes and balancing our funding mix,” the spokesperson said.

“The changes we are making today are designed to deliver a more balanced deposit book.”

Do you have money with a neobank? Have you investigated their account offerings?

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    COMMENTS

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    21st Jan 2020
    10:55am
    Fundamental axiom: ALL BANKS ARE BASTARDS.
    Retiring Well
    22nd Jan 2020
    1:25pm
    Nut I love them as they have helped me no end.
    Anonymous
    23rd Jan 2020
    1:25am
    One farrow spart a spring maketh not...

    21st Jan 2020
    11:14am
    Well - it is competition... and anything goes in saying the 'other guy' is evil - even when they are ...
    Ok
    21st Jan 2020
    11:19am
    I am getting a small pension from overseas and AMP bank charged me $10.00 a month for "transfer fees". It was close to 10% of the small pension payment. When I wrote to the CEO about it, I received a letter telling me the fee would be waived. I noticed that I was no longer charger the fee but just last week, AMP had sneaked in the fee again. I did ring back and complain but I have not hear anything back as yet.
    Anonymous
    21st Jan 2020
    2:24pm
    Just at the time when you want to sit back and not worry any more about petty details - along comes somebody to offer you endless petty details you need to watch all the time...

    Modern Australia!!
    Mariner
    21st Jan 2020
    3:17pm
    In my case I pay $2.50 every month for the fee getting the overseas pension. It is sent fees paid but I have been told the RTGS fee will always be charged here in Australia. After 6 years I got used to it, pointless arguing.
    Katz
    21st Jan 2020
    3:56pm
    I am with ING Direct, they reimburse all fees and charges regardless of what they are
    Baby Huey
    21st Jan 2020
    11:35am
    Before the Royal Commission the banks were allowed by succeeding governments to engage in criminal conduct screwing as many customers as possible. After the Royal Comission the banks are back to business as usual engaging in criminal conduct screwing as many customers as possible.
    Rae
    21st Jan 2020
    1:23pm
    I certainly don't trust them not to lose my money. I've read the Bail In legislation and I also know about age $20 billion limit per institution. Safe? Not necessarily.
    older&wiser
    21st Jan 2020
    2:03pm
    Not interested in any bank that says you have to deposit minimum of $1000 a month. Once again, doesn't help a pensioner.
    Katz
    21st Jan 2020
    3:35pm
    I’m on a pension. As my pension goes straight into the account. This meets the requirement of the $1000 deposit. I also pay no fees, all atm, international And local charges are reimbursed by the bank. I even get notification if I have overdrawn and given three days to rectify the account before being penalised, unlike big banks that penalise you the second it’s overdrawn.
    With the higher interest rates and the bonuses mentioned I find this is the best banking for pensioners.
    Mamacrystal
    21st Jan 2020
    2:18pm
    Had been with one of the "Big 4".... have now shifted 95% of what I have to a credit union. Keep the bank acc going as my pension gets paid in there and can't be bothered with the palaver of closing the acc and changing things with the delightful to deal with Centrelink. Easy enough to transfer on the internet so no hassle.
    Mariner
    21st Jan 2020
    3:21pm
    Smaller banks are good for people living in capital cities or larger centres; we are just sometimes lucky we still have a bank in the neighborhood. St George and Suncorp have said bye-bye already in the last 2 years.
    Retiring Well
    21st Jan 2020
    3:43pm
    I will never use a credit union ever again after what they put me though. I've had no trouble what so ever with the big 5 banks.
    SuziJ
    22nd Jan 2020
    8:36am
    Mariner, we still have St George & Suncorp, but no ANZ locally.
    ex PS
    24th Jan 2020
    8:11am
    Yep, been with a Credit Union for decsdes and never had a problem.
    Got sick and tired of having to constantly keep watching what the bank was up to and correct their mistakes.

    21st Jan 2020
    3:45pm
    They pay good dividends.
    Katz
    21st Jan 2020
    3:55pm
    I left the big banks and opened an account with an internet bank and never looked back!
    My pension goes directly into the account which meets the requirement of a $1000 deposit per month.
    All fees including ATM, national and international fees are reimbursed immediately.
    If I overdraw I receive a notification and given three days to rectify the account before being charged a penalty, unlike big banks who penalise you straight away.
    If people aren’t comfortable using the internet they can phone, the call centre staff are all friendly and very helpful.
    The bonus interest rate on the savings account attached to my day to day account is ongoing rather than a time limited introductory offer.
    The only negative for some people that I can think of is that it there is no physical presence for those that prefer to do business face to face.
    With a high interest rate, no fees at all and grace periods on overdrawing, internet banks are great for pensioners who have to budget every cent.
    Mariner
    21st Jan 2020
    4:05pm
    For a lot of us the lack of physical presence is rather off-putting.
    leoniey
    21st Jan 2020
    6:31pm
    Which bank Katz? Sounds like something I'd be interested in.
    Katz
    21st Jan 2020
    9:56pm
    Yes Mariner, that is their only let down, some people do prefer a physical bank, especially the older generation. I’m quite happy without one though, the phone operators are great and there is a branch in Sydney (handy if you live in Sydney which I don’t lol)
    SuziJ
    22nd Jan 2020
    8:50am
    My Concession account with a fully-owned subsidiary of the Westpac group gives me the following:

    1 A fee-free account
    2 No minimum deposit, just so long as my pension is deposited
    3 Free withdrawals at any ATM of the 'Big 4'. It's not so with smaller credit unions or RediATMs, where they charge you a 'fee' for using their ATMs.
    4 A 'local' branch with ATM and face-to-face interaction. I live in a large rural NSW city, 7 hours South of Sydney and 3.5 hours from Melbourne.
    5 An easy-to-use internet banking system.

    I've had no problems with my bank, and will stay with them into the future.
    Katz
    22nd Jan 2020
    12:06pm
    Sorry Leoniey, I did reply yesterday but for some reason it hasn’t saved. I’m with ING Direct. I did a lot of research comparing banks, credit unions and member owned banks when I was looking for a saving account. This was a few years ago and ING Direct were the best at the time, there may be better ones out there now, I haven’t checked because I’m happy with my ING Direct accounts. I have an Everyday account and a Savings Maximiser account.
    I get ALL of my atm charges reimbursed regardless of which one I use and if I do online shopping I also get any international fees reimbursed.
    If I want to deposit a cheque or cash I can go to Australia Post to do the transaction.
    They have all the info on their website ING Direct Australia. Hope this helps, definitely worth looking into x
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