Here’s why Australians are flocking to the new digital banks
Hundreds of thousands of consumers are taking their money over to challenger banks Judo, Xinja, Up and Volt.
For anyone still unsure as to whether or not consumers would actually switch to one of the new neobanks, I think we well and truly have our answer. Digital challenger bank Judo has this week hit $1 billion in consumer deposits into its market-leading term deposit products. Of all the new banks to be granted a full banking licence, Judo is the first to hit this milestone.
Judo's term deposits boast fixed interest rates up to 2.40% p.a., which is very competitive in today's low rate environment. It also offers a loyalty bonus of an extra 0.10% p.a. for customers who open another term deposit after theirs has reached maturity.
But it's not just the attractive interest rates driving consumers towards Judo, it's also what the bank is doing with the money. Judo says 95% of the money deposited by consumers goes towards loans for small and medium sized businesses in Australia.
"The feedback we are getting from many of our customers is they want to contribute to the economy by helping Australian small businesses grow and create more jobs. Our customers know that their deposits are supporting the small business community with vital funding," said Judo's head of deposits Patrick Nolan.
Fellow digital bank Xinja launched its savings account, Xinja Stash, just 7 days ago and already has more than $30 million in deposits. The bank says that half of these account holders have come over from the Big Four banks. Like Judo, Xinja offers a market-leading interest rate on its savings account. But Xinja founder and CEO Eric Wilson says it's the "no strings attached" element that's the real point of difference.
"There are no strings attached to our great rate. There is no introductory period, no mandatory monthly top-up amount, no minimum deposit - no bate and switch. Xinja Bank's 2.25% interest is calculated daily and paid monthly. You get the full rate on every dollar in your account," he said.
Elsewhere, Volt began onboarding customers on the waitlist for its new savings account in December. At the time it reported an excess of 40,000 customers already on the list, with that number likely to have grown significantly by now.
Founder Dom Pym said the reason consumers were leaving the traditional banks in favour of an Up bank account was because of the better mobile banking experience. "Our customers are all coming from the Big Four, ING and Macquarie. That's because they're the current incumbents and they've got the best apps. Bendigo, Macquarie, ING and CommBank would be the four best mobile apps in Australia. So all the customers we've been winning at Up have been coming from them," said Pym.
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