Learn how a digital neobank could benefit you and how you can get started with one today.
Like many other parts of our lives, banking is becoming increasingly digital. Australia has a number of new digital banks, also called neobanks, promising to revolutionise the financial industry through the use of world-class technology and digital services.
Learn about some of Australia’s new digital banks in this guide and how a completely digital bank is different to an existing bank that offers digital services and platforms.
Like the name suggests, a digital bank operates digitally, usually from an app, rather than from a physical branch or office. A digital bank is a fairly loose term; the correct industry name for these banks is a neobank.
A neobank is a completely digital bank that doesn’t use any existing legacy systems to operate. This means the bank doesn’t use any physical infrastructure or digital operating systems that are already being used by existing financial institutions in Australia. The technology used by these neobanks is developed from scratch.
What other digital banks will be launching in Australia?
There are a number of digital banks lining to start offering products in the next year. This may be because they are yet to receive a banking licence or their products are still being developed. Some of these banks include:
- Volt Bank. Volt Bank was the first to receive the new restricted Authorised Deposit-Taking Institution (ADI) licence. While yet to formally announce specifics for its products, we are expected to see a savings account, term deposit, a transaction account and loans sometime in 2019.
- 86 400. This new bank is named for the number of seconds in a day and has applied for an unrestricted ADI licence. It is backed by Cuscal and expected to release a transaction account and savings account in 2019.
- Archa. Archa has applied for a restricted ADI but will be working with a regulated ADI at launch. It is expected to launch a multi-currency transaction account, a savings account and international money transfers.
Many banks in Australia appear to be digital banks since they don’t have branches and are focussed on developing top quality mobile banking apps for their customers. However, just because a bank doesn’t have branches and offers a range of digital products and platforms doesn’t mean it’s a digital bank or a neobank.
A bank offering Apple Pay isn't necessarily a digital bank.
Many banks offer contactless payments via digital wallets like Apple Pay, Google Pay and Samsung Pay. Westpac is the oldest bank in Australia and it offers Google Pay to its customers, yet Westpac isn’t considered to be a completely digital bank.
Similarly, if a bank offers a top-notch mobile banking app, Internet banking services, cardless cash facilities and digital savings tools, this doesn’t automatically mean it’s a digital bank either. Remember, a 100% digital neobank is one that doesn’t use any existing banking systems or infrastructure.
ING, ME and UBank aren’t 100% digital banks.
For example, ING is owned by multinational Dutch bank ING Group and relies on its infrastructure and legacy systems to operate. ME is owned by more than 20 industry superannuation funds, including AustralianSuper and Hostplus. Similarly, UBank is actually owned by NAB, one of the Big Four banks in Australia, and relies on a lot of NAB’s existing operating systems to function.
Digital banks need to have the same banking licences and approvals as existing Australian banks before they’re able to offer products and services to consumers. These new banks will be regulated by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC) in the same way that existing banks are regulated.
Your deposit of up to $250,000 with an Australian authorised deposit-taking institution (ADI) is protected by the Australian government. This means if something were to happen to the bank, your money (up to this amount) would be safe. Note that some of the digital banks mentioned in this guide are not yet considered banks (they aren’t ADIs) because they’re waiting on their banking licences from industry regulators.
If you’re interested in joining one of these new neobanks, you can join their waitlist by visiting their website. When they launch products, those on the waitlist will be the first to know and the first to receive access to these new products.
Watch our interview with 86 400 co-founder Anthony Thomson and digital banking expert Chris Skinner.
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