What are digital banks in Australia?

What is a digital bank?

A digital bank is one that operates mostly online with no (or limited) physical bank branches for customers to visit. However, these days you could argue that most banks are digital banks as they all offer internet banking and mobile banking apps.

A digital bank is a fairly loose term; the correct industry name for the banks that operate 100% digitally is a neobank. There are only a few true neobanks in Australia.

What is a neobank?

A neobank (or commonly referred to as a digital bank) operates entirely digitally, usually from an app, rather than from a physical branch or office.

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. It's a bank that operates via an app on your phone.

What are some examples of neobanks in Australia?

Around the year 2019 we saw a big increase in the number of new digital banks launching and trying to get banking licenses. However, most of these have since closed down or been acquired by a larger, traditional bank.

• Up: Up Bank is a mobile-first bank that is hugely popular for its helpful mobile app. It operates under the banking licence of Bendigo & Adelaide Bank.
• 86 400: This neobank was developed to be 100% mobile. It has been aqcuired by NAB and has merged with Ubank so the brand no longer exists in the market.
• Xinja: Xinja was a neobank which received its full banking licence, however closed down a few years after it launched and is no longer available.
• Volt Bank: Despite being the first neobank to be granted a banking licence, Volt never properly launched a product in Australia and closed down in 2022.

ING, ME, Ubank and AMP Bank GO are digital banks, but not neobanks.

Many people refer to ING, ME, ubank and AMP Bank GO as digital banks because they don't have any physical branches - which is true. However, these banks aren't neobanks in the traditional sense because they rely on existing banking infrastructure.

That's not to say that these banks don't offer great digital services, because they do. ING has one of the most popular banking apps and ubank is known for its easy-to-use app with spending insights too.

Our expert says

"Digital banks are really not that different to other banks, except they naturally make things easier to resolve online, their apps are more user-friendly, and they even have more flexibility to add fun little perks! I started using the Up app after a colleague told me about its Friday happy hour feature! It was super easy to sign up. I didn't need any complicated ways to prove my ID and it was done in seconds, all over a pint. We both got a $10 referral bonus, but the perks didn't end there. Using Up's happy hour feature got me a $3 cashback on a $10 drink. If you're more of a morning coffee drinker, you might also appreciate the Perk-Up offer where Up randomly chooses to reimburse customers up to $6.50 when you've spent at a cafe between 7am and 11am. "

Rebecca Pike

Editor, Money

Are digital banks safe?

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 are regulated by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC) in a similar way to how 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, under the financial claims scheme. This means if something were to happen to the bank, your money (up to this amount) would be safe.

Mobile-only banks vs online banks

Mobile-only banks are designed to be accessed from an app on your smartphone. Unlike traditional banks, there are no bank branches and unlike online bank there's no option of Internet banking via a desktop. While mobile-only banks and online banks seem similar, there are a few key differences that set them apart.

• Access. Mobile-only banks are called as such because you can only access them through your smartphone or, sometimes, your tablet device. Other online banks such as ING and ME still offer Internet banking portals that you can access on your computer. They are "online banks" because they simply have no bank branches and you can access them online.
• Technology. Some online banks are part of larger international finance groups (ING), have long-established financial services backgrounds (AMP) or use the infrastructure of big banks (Ubank and NAB). Mobile-only banks may still partner with larger banks, but are usually building their own bank from the ground up to be able to be nimble with their products and features.
• Product offerings. Online banks such as ING, AMP, ME and Ubank have been around for a lot longer than mobile-only banks and so have a more diverse product offering. For instance, ME offers bank accounts, home loans, credit cards and personal loans and ING has a similarly diverse offering. Mobile-only banks, for now, tend to only offer one or two products.

Pros and cons of a digital bank

Pros

• Impressive apps packed full of features
• Detailed insights into your spending and saving habits
• Competitive interest rates and low or no fees

Cons

• Some only offer limited products
• No branches for people who like to visit a branch

Frequently asked questions

• Is there a bank that is only online?

  Up Bank (which is owned by Bendigo and Adelaide Bank) operates entirely online without physical branches. UBank, which is owned by NAB, is another bank that operates entirely online. ING operates entirely online in Australia. In the past there were other digital banks like Xinja and Volt, but both have closed their doors.

• Which bank has the best online banking in Australia?

  Up Bank and ING are often rated highly for their user-friendly online banking platforms and comprehensive digital services.

• Is it okay to only have an online bank?

  Yes, it's perfectly okay to only have an online bank. If you do all of your banking online, you don't need a bank with physical bank branches.

• Does having Google Pay mean it's a digital bank?

  Many banks offer contactless payments via digital wallets like Apple Pay, Google Pay and Samsung Pay. But this doesn't automatically mean they're digital banks. For example, 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.

• Is ING a digital bank?

  ING operates entirely digitally in Australia, but it isn't a 100% digital bank. ING is owned by multinational Dutch bank ING Group and relies on its infrastructure and legacy systems to operate.

• Is ubank a digital bank?

  No, 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.

• Do digital banks have banking licences?

  When a digital bank receives its full ADI licence from APRA, it's included in the government guarantee scheme and your deposit is protected.

  Volt was issued their full banking licence (before it closed in June 2022). Revolut has submitted an application for an ADI, and Xinja was granted its banking licence from APRA, however Xinja bank closed down in 2020 and returned all money to account holders. Both Volt and Xinja handed back their banking licences when they closed down, and are no longer operating as banks in Australia.

  Up Bank uses the ADI licence of an existing bank (Bendigo and Adelaide Bank) so your deposit with Up is also guaranteed.

Written by

Alison Banney

Editorial Manager, Money

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Alison is an editor at Finder and a personal finance journalist with over 10 years of experience, having contributed to major financial institutions and publications such as Westpac, Money Magazine, and Yahoo Finance. She is frequently quoted in media outlets like SmartCompany and SBS, offering expert insights on superannuation and money management. Alison holds a Bachelor of Communications in Public Relations and Journalism from the University of Newcastle, and has earned three ASIC RG146 certifications in superannuation, securities and managed investments and general financial advice, ensuring her expertise is fully aligned with ASIC standards. See full bio

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