Savings flow to neobanks as Xinja's deposits hit $100m

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Savings flow to neobanks as Xinja's deposits hit $100m

By Clancy Yeates

Neobank Xinja says it has gathered $100 million in deposits in less than three weeks, surpassing its internal targets, as digital startup banks step up their attack on the big four.

With Xinja and rival neobanks 86 400 and Up all offering a market-leading interest rate of 2.25 per cent on savings accounts, Xinja's chief executive Eric Wilson said it had experienced a "massive response" since launching the product last month. “We expected to do about $120 million in deposits in a year, we’ve done $100 million in 19 days," he said.

Xinja CEO Eric Wilson.

Xinja CEO Eric Wilson.

It comes as neobank 86 400, which launched last September, on Tuesday said it had raised $120 million in deposits, while Volt Bank, which is still testing its products and yet to conduct a public launch, said it had raised $10 million in deposits.

Business-focused Judo Bank, the first start-up bank to be granted a banking licence, has raised more than $1 billion in deposits in nine months, including a $345 million in household deposits in December.

Although the amounts involved still add up to a virtual rounding error compared with the more than $2 trillion in deposits held by Australian deposit-taking institutions, the growth illustrates the potential competitive threat to banks.

Mr Wilson acknowledged some of the money was moving simply chasing higher interest rates. But he said half of its customers were coming from the big four, and half its customers had opened a transaction account, without a savings product.

86 400 chief executive Robert Bell and chairman Anthony Thomson.

86 400 chief executive Robert Bell and chairman Anthony Thomson.

“What I think it shows very clearly is that Australians are more than happy to move bank accounts, or to get another bank account, which is exactly the same model as we’ve seen in the UK,” Mr Wilson said.

Even so, industry observers have predicted a tough ride for the group of neobanks launching in Australia, as they attempt to lure customers from the big four. For comparison, Commonwealth Bank has more than $500 billion in deposits, while second-tier bank ING has more than $45 billion in deposits.

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While it is still very early days for neobanks, Mr Wilson said customers opening up accounts were older than it had expected, as 35 to 45-year-olds were the second largest age group, behind 25 to 35-year-olds. Xinja, which employs 88 staff, aims to start offering personal loans and mortgages in the second half of this year.

86 400 chief executive Robert Bell said the bank had also written $10 million in home loans. "86 400 is focused on both sides of the balance sheet to build a genuine alternative to the big four and help Australians take control of their money," Mr Bell said.

Volt chief executive Steve Weston said the bank had only recently started offering deposits to some of the customers on its waiting list and it was "very excited" about its upcoming public launch.

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