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