July 2019

Posted by Anton Murray Consulting on . Posted in 2019

Australian banks have been digitising for decades now, with branches becoming almost obsolete, and every major bank offering a mobile app. Neobanks take digital banking one step further. Neobanks are 100% digital and look more like a tech company than a bank to many. Capitalising on the low level of trust Australians have in the big banks since the Royal Commission, Neobanks are looking to disrupt the industry and increase competition – and it seems to be working.

There are a few key players in the Australian Neobank industry: Xinja, Volt, Douugh and Revolut. Their models are similar – no branches means low overheads, so they can offer lower interest rates. Neobanks also market themselves to younger, tech-savvy consumers as well as those running small businesses, who have arguably been somewhat overlooked by the big banks. Significantly, Volt was made an Authorised Deposit-Taking Institution (ADI) license in January and Douugh is planning on being the first Neobank to list on the ASX later this month.

It’s a similar story in Hong Kong, with virtual banking licenses becoming more commonplace. The Hong Kong Monetary Authority issued three licenses in March and suggested that more are expected to be granted later this year. As recently as May this year, Singapore’s MAS was reviewing allowing neobanks into The Lion City.

Whether or not Neobanks will really take off in Asia-Pacific remains to be seen. While some consumers will no doubt jump on board, traditional banks will likely still hold a large proportion of business for the moment. This is where the approach of ‘coopetition’ will be key to the success of Neobanks. The more prominent Neobanks have agreed to avoid poaching customers from each other, as this will do little to assist them in making a dent in the market. This favoured approach is a united front against big banks to allow more players to enter the game. It’s definitely an area to watch.

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