Australian challenger banks: who’s who (and what’s their tech)
With several new entrants trying to muscle into the Australian banking sector and upset the big four, FinTech Futures has created a comprehensive list of the known challengers to date and the technology they are using.
Taking on the big four
We’ll be revisiting and updating this list on a regular basis. If you have any additions to the list, please get in touch with our editorial team.
Last updated: 09 February 2021
Launched in June 2018, the bank was led by former ANZ Japan CEO, Robert Bell, and ex-Cuscal Payments CIO Brian Parker. Joining as incoming chairman is Anthony Thomson, co-founder and former chairman of Atom Bank and Metro Bank.
It was, prior to the NAB sale, fully funded and backed by Cuscal, Australia’s largest independent provider of end-to-end payments solutions. The plan for 86 400 required in excess of $250 million of capital over the first three years of operation, with “additional shareholders expected over that period”.
Its core banking platform is sourced from its Australian banking technology partner Data Action and is operational.
Its customer experience engine is 86 400’s own proprietary technology and uses data, artificial intelligence (AI) and cloud-based technologies for a “single view” of a customer’s finances.
At the end of January, the National Australia Bank (NAB) bought 86 400 for AUD 220 million ($169 million). The challenger merged with NAB’s digital offshoot, UBank.
Melbourne-based mobile-only challenger Archa is not currently a bank, but is working with a licensed bank partner to open for business. In due course, it will obtain its own ADI (authorised deposit-taking institution) licence.
It positions itself as a financial platform for users to save, spend, travel, send and receive money via mobile phone. Funds can be stored in a fee-free global account; hold multiple currencies at once, and move between them at flat rates.
For its technology, Archa is exploring how it can use blockchain technology and cryptocurrency networks.
Archa was founded in 2016 by Oliver Kidd (CEO), who is also a company secretary for Benitec Biopharma.
The average age in Archa’s management team is 28.
A start-up lender in Australia offering loans from AU$2,000 to AU$30,000. It does not yet have an authorisation from the Australian Prudential Regulation Authority (APRA) to be a bank or a deposit-taking institution (ADI), but is understood to be working towards this (April 2019).
The firm says it is “driven by smart, simple design” on its mobile platform.
Alex, originally named Bene, was co-founded by Craig Fenwick, CFO and Simon Beitz, CEO. Prior to this, the two spent more than ten years working for Suncorp. It underwent its name change in early 2020.
The Brisbane-based fintech is trying to bring private banking and stockbroking to more than just the 1%.
It has partnered with digital currency exchange Elbaite.
The start-up already offers businesses property development funding, debt financing, and fund management.
The digital challenger is currently in the process of applying for a banking licence from the Australian Prudential Regulation Authority (APRA).
Its products target entrepreneurs, family offices, and high-net-worth individuals across the mid-market.
Clive Kay, founder of Alliant Perpetual – a New Zealand-based building society – heads up the venture. Alongside Brett Hales, founder of payments firm Tappr, and Steve Toomey, a former Morgan Stanley executive.
Goldfields has a full banking licence and provides retail banking services to customers in Perth and regional Western Australia. It also has branches in Kalgoorlie and Esperance.
It offers savings and investment accounts, business accounts, personal loans, home loans, and term deposits. The bank is an authorised deposit-taking institution regulated by the Australian Prudential Regulation Authority (APRA).
In 2017, Goldfields implemented Rubik Model Bank, a front-to-back office system based on the Temenos’ T24 core offering. (Rubik was acquired by Temenos later in that year.) The system is delivered on a hosted basis.
Established in 1982 as Goldfields Credit Union, the company demutualised and listed on the Australian Securities Exchange in May 2012.
The bank also has a subsidiary, Finsure Finance and Insurance, which was was founded in 1995. This provides B2B mortgage aggregation services.
The Australian fintech is pursuing one of the country’s deposit-taking banking licences and has opened up a waiting list to its first customers.
The initial 10,000 to sign up and open an account will become “Hay Founders”, giving them access to a special founding members card and early access to all Hay’s new product offerings.
A handful of Hay’s executive team come from Shawbrook Bank, a 2011-founded UK specialist bank for lending and saving. This is why Hay says its team has “directly participated in the UK neobank revolution”.
Headquartered in New South Wales with international offices in London and Belfast, the fintech says it takes just three minutes to sign up and then the card will be sent within five days in recyclable packaging.
The fintech has tested the digital bank for 18 months. “What makes this experience possible is Hay Technology’s proprietary platform, an API-first, cloud-native micro-services architecture […] built from the ground up,” the company said in a statement.
With Hay being a Visa Fintech Fast Track partner, its users get fee-free Visa foreign exchange (FX) rates, $500 fee-free ATM withdrawals per month and no fees on international transactions – in-store or online.
Payment and identity technology firm iSignthis plans to get a neobanking licence from the Australian regulator in Q1 2019.
The licence will allow the Melbourne-based company to bank with the Reserve Bank of Australia (RBA), and place customer funds at the RBA repo window to earn interest. Its tier 1 capital requirements have been agreed in principle, and its current balance sheet meets APRA’s initial capital requirements. The new bank will not offer loans or credit.
iSignthis offers Visa, Mastercard and JCB as a principal licensee in the EEA/EU. Diners, Discover, ChinaUnionpay and AMEX are also licensed, with “technical integrations underway”. Once all its payment channel capability is in place, the firm says it can offer a service “more extensive than Australia’s big four banks”.
In September 2018, it acquired core banking system vendor Probanx Information Systems for €400,000. While in June 2018, it launched its Euro-based, business-to-business (B2B) transactional banking service with paytech start-up Gobbill.
Melbourne-based Judo Bank (formerly Judo Capital) officially unveiled its banking plans in March 2018 as it targets the nation’s SME sector.
Judo received a banking licence from APRA in April 2019 – the culmination of a “strategic build-up of the company” over the past three years. Its model is based on UK challengers such as Aldermore, Shawbrook, and OakNorth.
For its tech, it uses a variety of different vendors. Unifii’s Business Transformation Platform is used for its technical infrastructure. For its small business lending platform, it will use one from Realtime Computing, based in Perth, Australia.
To deliver both the platform and application, Judo turned to Microsoft and BankSight. The latter provides a banking CRM and deal builder solution for use both by Judo lenders and partner brokers.
Also involved in the AWS-based lending platform is Brisbane-based Itoc. Judo states that it was designed and built from the ground up in six months.
For its core banking system, it uses Temenos’ T24 as a managed service on the Temenos Cloud. T24 will integrate with Judo’s existing systems via an API layer.
It also uses Vermeg’s AgileReporter package for APRA reporting requirements.
Digital banking start-up Pelikin aims to reshape the way people save, send and spend their money in Australia and while travelling abroad. The company’s slogan is “spend like a local”. The founder is Sam Brown.
It will be targeting “digital natives” with its app and debit card. It is beta testing features such as immediate currency conversion, foreign bill splitting and group holiday saving goals.
Pelikin says it is doing away with complicated account numbers and instead encourages users to set a unique Pelikin handle, just like Twitter.
“Setting up a Pelikin account will take as little as three minutes and it will travel with you wherever you go,” Brown says. “Gone are the days of notifying your bank that you’re travelling overseas or waiting over 24 hours for a bank transfer from a friend to come through.”
QPay, based in Canberra, offers a banking platform targeting the student sector in Australia (and also the UK).
It alerts users about their expenses with a mobile notification with an emoji for whatever its users spent their money on – e.g. it will show you a pizza slice emoji if you buy pizza.
QPay was founded in 2013 by Andrew Clapham and Zaki Bouguettaya. Andrew Chick, former Royal Bank of Scotland’s (RBS) Australian head, is on QPay’s board of directors.
The platform has also been launched in the UK, with 24,000 students from Cambridge, Oxford, Edinburgh and Durham now using QPay Swipe, a pre-paid card.
The app sends targeted and relevant deals to users, based on previous purchase behaviour, “ranging from discounted Netflix and Spotify to reduced co-op books and burritos”.
The aim of the card is to help students save money on products and services, with future aims to become a challenger bank in both Australia and the UK.
European banking challenger Revolut, which provides digital banking services to consumers and businesses, came to Australia in beta in June 2019. Revolut says its account is “for global fee-free spending, free international money transfers and instant payment notifications”. Customers in the UK, Europe and Australia will now be able to transfer money to each other instantly and for free, it says.
The company also plans to hire “up to 30 high skilled roles and invest millions into the Australian economy”.
In spring 2018, Revolut raised $250 million in a Series C funding round, followed by another $500 million in a Series D round later that year. The new capital will be used to expand Revolut worldwide, including Australia.
Revolut aims to onboard 100 million customers in the next four years. As of spring 2019, it claimed over four million customers and processed over 350 million transactions, with the total value of $5 billion+.
For its technology, Revolut relies on its own in-house processing and card issuing platforms. In early 2019, it signed a deal with start-up ClauseMatch to adopt its regtech to streamline management of internal policies, controls and regulatory compliance.
This Sydney-based bank has been around since 2001 and says it is Australia’s “largest independent Eftpos provider”. It is focused on SMEs and has a licence to provide banking products by APRA. At present, Tyro has around 400 staff members.
In March, it unveiled Tap & Save, to enable merchants to process debit tap-and-go payments through the Eftpos network.
Tyro provides integrated payment, deposit and unsecured working capital solutions for more than 20,000 SMEs, and collaborates with more than 200 POS providers and cloud accounting platforms.
In its fiscal year 2017, it states that it processed more than $10 billion in payment transactions, generating $121 million in revenue.
Unveiled in 2008 and developed and supported by National Australia Bank (NAB). It operates under NAB’s banking licence, and offers home loans, online savings accounts, and term deposit accounts. UBank has more than 400,000 customers.
It has launched Free2Spend – an in-app tool for personal finance management (PFM); and RoboChat, a virtual assistant for online home loan applications. The latter was built with IBM Watson.
For its core banking tech, UBank uses Oracle Banking Platform (OBP) from Oracle FSS (and so does its parent, NAB).
The bank (or, to be more precise, banking service) was founded by Dom Pym and Grant Thomas, a former AFL coach.
The tech company behind it is Melbourne-based Ferocia.
Up’s technology is fully cloud-based. The financial services are being provided by Bendigo Bank, so Up doesn’t need its own banking licence.
The challenger has been kept on the low until now. It has been trialling its services with 1,500 customers, which have sent a total of $2.2 million in transactions.
It already has Apple Pay, Google Play, Garmin Pay and Fitbit Pay implemented, and says it is bringing products to the market that Australia has never seen before.
Sydney-based Volt Bank was given Australia’s first new restricted banking licence. In January 2019, it was the first challenger to become a fully licensed bank.
The bank says it is “mobile first”. It has raised $100 million in equity so far, ahead of plans for a Series D round of $50 million and planned IPO later in 2020. Volt is preparing to launch a cash management account in February 2020, transaction accounts in May 2020 and personal loans in June 2020.
At a $285 million valuation with the Series D round, the challenger is using the funding rounds to support the regulatory capital requirements for an IPO.
In October 2018, PayPal and Volt partnered to allow customers to log in using their PayPal credentials. For its core banking system, Volt has selected Temenos’ T24.
The bank was founded by Steve Weston (CEO) and Luke Bunbury (deputy CEO), who have both worked in banking and financial services.
Launching its beta in December 2019, the neobank launches its product to the public in February 2020. “Until we had product in the market we could not justify an increase in share price and valuation,” says Weston.
Volt’s savings account pays 2.15% interest as an ongoing rather than introductory rate and has no deposit conditions.
Xinja (returned licence and deposits in December 2020)
The neobank emerged from the shadows to unveil its plans for a mobile-only digital bank in 2017. It had no bricks and mortar branches.
Eric Wilson was Xinja’s chief executive and a former National Australia Bank (NAB) executive. Jason Bates, a co-founder of UK digital challenger bank Monzo, was also on Xinja’s board.
In March 2018, the start-up unveiled its prepaid travel and spending card and app.
In December 2018, the APRA granted Xinja a restricted authorised deposit-taking institution licence (RADI). The fintech later launched deposit accounts in January 2020.
For regulatory reporting and compliance, the bank opted for Verisk Financial’s cloud-based technology.
For its underlying tech, Xinja uses SAP Cloud for Banking. This provides open banking capabilities, and integration to payment systems and business networks.
In December 2020, Xinja crumbled under the pressure of its high interest rates. It handed its licence back and returned most of its deposit holders’ money back, though says it is still operating its trading service.
Great article – You mentioned you would update regularly. It might be time to do so already with Up and others..
Thanks!
Bill
We’ve now added Up to the list!
Fantastic you added Up, perhaps it’s time to add Bene to the list. I believe they are further along then some others listed above.
Thanks,
Bill
Thanks, we’ll check it out and add to the list if applicable!
Love your work, Bill.