DIS­RUP­TION

Money Magazine Australia - - BANKING OUTLOOK - Josh Sale, se­nior re­search an­a­lyst, Canstar

QHOW WILL NEOBANKS DIS­RUPT THE MAR­KET IN 2019?

If Uber has taught us any­thing, it’s that even the most reg­u­lated in­dus­tries are still prone to dig­i­tal dis­rupters. With the first re­stricted, au­tho­rised de­posit-tak­ing in­sti­tu­tion (ADI) li­cence be­ing is­sued to Volt in 2018, and a line-up of other play­ers such as Xinja and Up wait­ing in the wings, 2019 looks like the year when neobanks will start mak­ing their mark in Aus­tralia.

With dig­i­tal plat­forms built from the ground up, neobanks are at­tempt­ing to rev­o­lu­tionise how con­sumers in­ter­act with their fi­nances, promis­ing to re­move fric­tion from ev­ery­day trans­act­ing and pro­vid­ing con­sumers with lower-cost prod­ucts than their com­peti­tors.

To de­liver on these prom­ises, neobanks will need to achieve scale, which un­der a re­stricted ADI li­cence could pose a se­ri­ous chal­lenge, es­pe­cially when com­pet­ing with nearly 100 other ADIs also bat­tling for a slice of the de­posits and lend­ing mar­kets.

But with neobanks’ dig­i­tal-first ap­proach, it’s easy to imag­ine that there is a con­sumer seg­ment that will see plenty of ap­peal in this. Whether there is enough ap­peal to get them to change banks, only time will tell.

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