Are neobanks revolutionising the banking industry?

This year, Business Insider reported that digital banks – also commonly known as neobanks, have raised $3.71 billion globally. In Australia alone, neobanks have gained more traction with 58% of digitally active Australian consumers using fintech products, according to the EY Global Fintech Adoption Index 2019. Neobanks have disrupted traditional banking and have allowed many Australians to lead a more convenient lifestyle whereby they can access and sort out their finances on their mobile phones at any time and place they want.

Australian neobank 86 400 Chairman and Co-founder Anthony Thomson, who also founded Atom Bank and Metro Bank in the UK, reported that“ there are 9 million Australians who are banking via smartphones, and that’s a really big market opportunity, and that number is growing every year”.

Based on the research conducted by Medici Research, Volt Bank was identified as the most funded start-up in the Asia Pacific region. 11 of the most funded neobanks are based in Europe, three in the Americas and two in Asia, namely Open with approximately $10 million and Neat with $7 million.

What exactly are neobanks?

Neobanks are digital banks whereby all business-to-customer interactions are conducted virtually on a mobile platform. Australia’s financial watchdog, the Australian Prudential Regulatory Authority (APRA) are currently allowing neobanks to enter the market and accessing a restricted authorised deposit-taking institution (RADI) licence that will permit them to offer banking services and compete with traditional banks.

A RADI allows neobanks to act like a bank – albeit some restrictions such as a required minimum of $3 million in capital or 20% of adjusted assets. Neobanks are typically given a two-year period to raise the requirement level of capital for a full banking licence. Volt Bank and Xinja received a RADI on 18 December 2018 and this year alone, APRA granted full banking licences to Volt Bank as well as 86 400, and Judo Bank – thereby enabling them to operate as an authorised deposit-taking institution (ADI). While waiting for the impending approval of its ADI licence, Xinja has launched a pre-paid credit card product and has prepared a pipeline of additional products to be launched once its ADI is granted.

What’s new in the neobanking sector?

  • 86 400 has recently announced that its Pay Account will act as a savings account and enable its customers to transfer money and make regular purchases through a linked 86 400 Visa debit card or a digital walletlike Apple Pay, Google Pay or Samsung Pay.
  • Australian neobank Judo Bank that caters to small-to-medium Australian enterprises raised $400 million in a single funding round. Judo co-founder and chief David Hornery told StartupSmart that the company “is on track to lend more than $1 billion to Aussie small businesses by the end of the calendar year”.
  • In line with the popularity of neobanks, Commonwealth Bank of Australia is investing more than $5 billion in technology such as artificial intelligence (AI), machine learning, deep data analytics and behavioural science, to improve its app and enhance the customer experience of its 7 million digital customers. The revamped ‘CommBank App 4.0” will have added informative features such as financial advice or alerts about fraudulent transactions.

How to get started with a neobank?

With the number of restricted banking licences expected to be issued within the next couple of months, we can only envision the magnitude with which neobanks will be revolutionising the banking industry. At Progressive Recruitment, we see the relevance of neobanks in the market and this is why we are expanding our services in this sector and specialising in placing candidates within these exciting new roles.

If you are interested in joining a neobank or if you are a fintech company looking to hire your next talent, please feel free to contact us via the contact form below. You can also visit our LinkedIn page to find out more about what we do.

 

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