The Big Four banks have been under siege since the banking royal commission revealed a plethora of dodgy practices. They are now facing a fresh wave of challenges from a new breed of bank that analysts say will shake up the sector with benefits for young and old.
Australia has welcomed its first two neobanks – entirely digital banks with no physical presence. On Monday, Xinja became the first to publicly offer transaction accounts and, on Tuesday, 86 400 (named for the number of seconds in a day) followed.
Both have been granted full banking licences and have launched their products to the public. A third, Volt, has received a full banking licence but is yet to launch publicly and offer banking services, and Up banking has launched in partnership with Bendigo and Adelaide Bank.
Neobanks promise to be cheaper, faster and smarter than the big banks. They say that with no physical branches to maintain, their lower overheads mean more savings for customers plus faster and smarter money management.
86 400 chief executive Robert Bell told Business Insider Australia that customers would have free cash withdrawals from 10,000 ATMs in Australia and, just like any fully licensed bank in Australia, deposits up to $250,000 were guaranteed by the Federal Government.
“We’re launching a fully featured transaction account and a savings account with an interest rate of 2.5 per cent as long as you deposit $1000 a month in either,” Mr Bell said.
“You can download the app on the app store and sign up in two minutes. The digital identification is done in real time, so you use your passport or driver’s licence and that’s all you need. We literally designed it (the app) so you can actually do it sitting at the bus stop.
“Once completed, you’ll instantly have access to your two ‘Pay’ and ‘Save’ accounts and an aqua-coloured Visa debit card will be on its way to you in the mail.
“In the meantime, you’ll have access to Apple/Google/Samsung/Fitbit and/or Garmin Pay as you see fit. Payments are made by Osko, making it near-instantaneous to transfer money to a friend for a round of beers, for example.”
Talking up the benefits of 86 400, Mr Bell said the service would give customers more control and greater understanding of how their accounts are tracking.
Customers would be able to see their next Netflix subscription payment or electricity bill before it dropped, he said, helping with budgeting and bill paying.
“Australians waste about $2.7 billion a year on unused subscriptions, so those kinds of reminders are vital to make sure you’re not flushing money away,” Mr Bell said.
Go to finder.com.au for a comparison of neobank services.
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