The dust has hardly settled on round one of Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and already the future of banking in Australia is making itself heard, no doubt somewhat annoyingly for the CEO’s of the Big 4.
The licence will allow the bank to accept deposits worth up to $2 million in total.
The news may have come as a surprise to many, given volt has laid much lower than digital banking competitor Xinja. Targeting a similar audience with a similar product set, Xinja gained attention back in March after using equity crowd funding platform Equitise to raise $2 million from 1000 investors.
But that’s not all the action in the disruptor banking market.
Hot on the heels of the volt press release was news aspiring SME challenger bank Judo Capital was days away from closing ‘an oversubscribed $110 million capital raising’.
With the Royal Commission in full swing, and all the skeletons coming out of the closet, investors must be buying the pitch that now couldn’t be a better time to launch a new bank. It certainly helps scandal ridden industry giants like AMP and their spectacular own goals are basically selling the pitch deck inadvertently. While it’s yet to be seen if the ‘fee for no service’ debacle is the tip of a much bigger iceberg, as many will know, where there is smoke, there is often fire. As a result, investors are willing to take a punt on the likes of volt, Xinja and Judo Capital.
Can Australia’s population of 24 million people can support another two consumer facing banks, plus another SME bank? This is the elephant in the room. Australians are deeply apathetic when it comes to financial services. Despite the scandals to date, most people haven’t switched banks – mainly because in most people’s eyes, they are all as bad as each other, so what’s the point. To really ride the Royal Commission wave, these three startups will need to hustle to get a product to market quickly.
Incumbents aren’t sitting back and there were plenty of counterattacks in the press this week. Westpac was talking up the pivotal role its venture arm will play in hellping it find $130 million worth of savings in the second half of this year. While over the street at NAB, CEO Andrew Thorburn was also out selling the banks $4.5B digital investment.
Whatever the case, I’ve got my popcorn.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.