Derek Rose
(Australian Associated Press)
Australia’s new challenger banks say they’re signing hundreds of customers each day and taking millions in deposits from Australians disgusted with scandals from the country’s major banks.
Neobank Xinja said on Wednesday it has reached $115 million in deposits in just 20 days, putting it on pace to reach its goal for the year in just one month.
“It’s very exciting and probably a little terrifying,” said chief executive Eric Wilson.
“It’s a massive and overwhelming response.”
As of Wednesday it had 23,000 accounts from 15,500 customers, having added 250 new customers the day before.
Xinja had a goal of getting $120 million in deposits in 12 months, and is close to achieving that in just three weeks, Mr Wilson said.
“It’s just remarkable, the response.”
Fintech Australian chairman Alan Tsen called Xinja hitting the $100 million mark in three weeks “incredibly impressive and shows that consumers are willing to deposit their money into challenger banks, which is contrary to what incumbent banks have tended to think would happen – that people would not trust neobanks.
“More broadly, I think this is just the beginning. I believe we’ll see consumers further embracing neobanks as their primary chequing account in the coming years,” he told AAP in a text message.
Other neobank executives say they too are seeing strong demand.
Up!, a partnership between Melbourne software company Ferocia and Bendigo and Adelaide Bank that launched 15 months ago, wouldn’t disclose deposits figures but co-founder Dom Pym said its coffers dwarfed those of all other neobanks combined.
“It’s gone absolutely out of control,” he said.
“I think we’re just at the beginning of our journey”.
He said Up! has over 185,000 customers and has been adding 500 to 1,000 customers each day.
It recently announced partnerships with Afterpay and Transferwise and this week announced customisable PayIDs for receiving payments.
Business-focused Judo Bank says as of January 31 it had $469 million in retail deposits, having added $124 million in January alone, with another $583 million in wholesale deposits from financial institutions.
“Given we were only granted a full banking license about nine months ago, we are delighted to have smashed the $1 billion mark in deposits despite very limited marketing,” head of deposits Patrick Nolan said.
Ninty-five per cent of Judo’s deposits are lent out to small and mid-sized businesses, from publicans in country NSW to beauticians in Melbourne’s city-centre.
Cuscal-owned 86 400, which launched in September, has over $120 million in deposits, chief executive Robert Bell said.
“More importantly, however, 86 400 has written its first $10 million in home loans,” he said.
“86 400 is focused on both sides of the balance sheet to build a genuine alternative to the big four.”
Volt Bank chief executive Steve Weston said while the bank was still taking customers off its wait list and not yet open to the general public, it had received over $10 million in deposits.
Xinja’s Mr Wilson said that while some customers had clearly been drawn by Xinja’s no-strings-attached 2.25 per cent savings rate, that clearly wasn’t the only reason they were joining.
About half of customers either hadn’t added a savings account or hadn’t bothered to fund it, Mr Wilson said.
He thought many customers were attracted by Xinja’s status as the only independent neobank open to the generla public.
To be sure, the deposits amassed by neobanks are still just a drop in the bucket in Australia’s financial landscape.
Australia’s biggest bank, Commonwealth, for example, had $264 billion on deposit from Australian households as of December 31, according to figures from the Australian Prudential Regulation Authority.
Overall $986.7 billion was on deposit from Australian households in the country’s banks at the end of last year – 74.8 per cent of that at the big four banks.