The neobank war in Australia is quickly heating up this year and media coverage is increasing rapidly. If you haven’t heard me ramble on about neobanks before on How To Money or The Australian Finance Podcast, let me give you a quick rundown. Neobanks are emerging banks in the Australian market, seen as generally independent, fully digital and built from the ground up — away from legacy systems and behaviours.

They present a modern brand and encourage consumers to interact and build the company with them. Their tech is usually on point and they come with features and tools not traditionally found in your regular banking apps, such as spending insights and instant low-cost currency exchange. The most important part is that they keep costs low. There’s some debate about whether a neobank using an existing provider behind the scenes (like Up Money and Bendigo Bank) is really a neobank, but honestly, if they provide a great digital banking product and service, are an ADI (Authorised Deposit-Taking Institution) and have a solid team running the show, I’m not too fazed.

Building a bank is an expensive endeavour; you need lots of experts in different areas to ensure you comply with all requirements and have the capital needed to ensure the ongoing operation of the bank. It’s a difficult task and hats off to the teams taking the leap, however, I am certain there will be some consolidation in the next few years. There is already a huge list of organisations who are authorised to provide deposit-taking services in Australia and provide the exact same government guarantee, just take a look here!

Here are some of the Australian neobanks currently open for business.

As interest rates are slashed across Australia, our up and coming neobanks are offering competitive rates to win over the hearts (and cash) of Australians. It’s certainly a great way to round up media coverage, but I really wonder how sustainable it is. Many of these neobanks that are operating without another banking institution behind them don’t offer any lending products such as mortgages, credit cards and personal loans, so these higher interest rates are funded from investor capital raised. In the next year, you’ll see lending products launched across the board because running a bank is mighty hard to do otherwise.

So what does that mean for you? Just because it’s a flashy new product with a great interest rate, it’s important to read the fine print and make sure you’re getting the product you wanted. Here are a few things to keep an eye out for when reviewing any financial institution.

Fees

  • Are there any account keeping fees?
  • Are there and cash withdrawal fees?
  • Are there any international transaction fees?

Interest Rates

  • Is the interest rate comparative or better than other providers?
  • What are the conditions on the interest rate (e.g deposit and purchase requirements)?
  • Is it a honeymoon interest rate (e.g. only lasts for 3 months)?

Features

  • Can you use BPAY/EFT/PayID?
  • Can you open multiple savings accounts?
  • Can you schedule payments?

Security & Regulation

  • How is client data secured?
  • Is the financial institution an Authorised Deposit-Taking Institution (ADI)?
  • What protections do you have if your account is hacked?

I’ve had many positive experiences with Australian neobanks and FinTechs, so I definitely recommend checking them out. Just remember to test them out before fully moving across to ensure they have all the features you require. It’s always a good idea to have a secondary bank account, in case one bank’s systems go down.

Kate — Founder & Editor of How To Money


Want to learn more about money and personal finance? Check out our article archive, the How To Money Podcast and the Australian Finance Podcast. Catch us on Twitter @HowToMoneyAUS and Instagram on @HowToMoneyAUS.

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