An alternative to the big banks already exists and it isn’t in neobanks according to the chief executive of a mutual bank, via InvestorDaily.
Heritage Bank chief executive Peter Lock said that neobanks did not offer anything new to the banking system.
“Forget the hype about neobanks. There’s nothing that digital banks and neobanks offer that customer-owned institutions such as Heritage Bank don’t already offer to people frustrated by the listed banks,” he said.
Mr Lock said that mutuals were tried and tested institutions who had market-leading technology and weren’t owned by investors looking to turn a profit.
“Unlike many neobanks, mutuals aren’t owned by big investors looking to make a profit. If you’re turning to them to escape the profit-maximisation excesses of the big banks, then you should think again.
Mr Lock said that mutuals offered a different mindset to listed banks as they did not have profit maximisation incentives.
“Regardless of their rhetoric, the listed banks face an inherent conflict between the interests of their customers and the interests of their shareholders. At the end of the day, the listed model exists to serve their shareholders above all else, not customers,” he said.
However, APRA’s general manager of licensing Melisande Waterford defended new entrants to the market during a panel last year where she said neobanks offered something new.
“Neobanks have a completely different mindset and a different approach to providing a service,” she said.
This mindset has proven to be popular with consumers as well according to recent data from Nielsen.
Nielsen’s latest data found a five-percentage point increase over twelve months of Australians looking to switch to a digital bank.
Not only are Australian’s looking to switch to digital banks but 75 per cent of digital bank customers would recommend their bank to others, compared to just 45 per cent of the big four.
GlobalData’s head of banking content for Asia-Pacific Andrew Haslip said that conditions in Australia were ripe for neobanks given the lack of trust in the industry.
“‘The clutch of neobanks waiting in the wings in Australia will have no better time to launch recruitment drives, while a range of robo-advisors, none of which have yet broken out into the mainstream, will have the best conditions yet to draw in new money,” he said.
Recently neobanks like Volt and Xinja have been granted restricted ADI licenses, making them one step away from a full banking licence.
