By Oliver Smith on Tuesday 11 February 2020
Anger at incumbent banks coupled with low savings rates is a potent steroid for the country’s nascent fintech industry.
Something of a financial revival is underway in Australia.
Digital banks are raking in billions in customer savings, while their traditional counterparts are rapidly embarking in partnerships with challengers.
Last month Judo Bank, Xinja and 86 400 reported collectively receiving more than A$1.1bn in customer term deposits since their launches.
At the same time, the Commonwealth Bank of Australia (CBA) has built a A$300m stake in pay-later challenger Klarna and has partnered with KPMG and Microsoft to launch a new incubator for 25 Australian startups.
According to research from EY, consumers are lapping up the changes, with 58 per cent of “digitally active Australians” now using a fintech service of some sort—up from 37 per cent in 2017.
The boom follows the release of last year’s Royal Commission report on banking, which captured the public anger in its detailing of the cut-throat sales culture inside many of Australia’s biggest incumbent banks at the expense of their consumers.
Levels of mistrust in Australian banks have soared in recent years, one survey labelled National Australia Bank (NAB) the “most distrusted bank in Australia” following the Royal Commission.
“This is the highest level of distrust we have ever seen for a bank brand in Australia,” wrote Michele Levine, CEO of market research group Roy Morgan.
Couple that with rock bottom savings rates of as low as 0.11 per cent at NAB, while Australia’s central bank holds interest rates at 0.75 per cent to stimulate the economy.
It’s in that environment that challengers like Judo and Xinja are playing into the hands of a public willing to try something, anything, in order to boost their savings and turn their backs on the big banks.
Read more: Judo Bank hits A$1bn in deposits as Xinja and 86 400 pile pressure on Australia’s big four
