Sydney 5th April 2023 – Embargoed until 00:01 AM AEST on […]
It’s no secret that 2018 was a tumultuous year for the Big banks in Australia. Hayne’s Royal Commission hearings took a toll and as a result, aggregate Big 4 cash profits for the year slumped under the weight of public dissatisfaction.
2019 does not promise to be any different. Ongoing challenges remain the same in an environment of heightened tension, lingering distrust and tightening regulation. Amidst this unsettling backdrop, neobanks are being hailed as revolutionaries, not yet tainted by the exposed wrongdoing of traditional banks and poised to shake up a market ripe for disruption.
For those unfamiliar with the term, neobanks are 100% digital, defined by their complete lack of brick and mortar presence. They are not simply a traditional bank with an outstanding ‘digital first’ user experience (a classification of which they are trying to distance themselves) they are start-ups with no ties to traditional banks. In fact, they are so new that out of the three neobanks that entered the Australian market in 2018, only one - Volt Bank has a full banking license from APRA as of yet, while others such as 86 400 and Xinja are still operating under a restrictive license. When these much anticipated licenses are granted however, will we get any closer to knowing whether neobanks really are the solution to the problems facing Australia’s financial sector?
While the majority remain unlicensed, data from DBM Consultants suggests that only just over 1 in 10 Australians had heard of neobanks. This is not a threatening figure on the surface, however it would be safe to assume awareness of these new digital options will grow as they continue to announce their entry into the market. It is another question entirely however whether neobanks will offer what Australians want from their financial provider.
Ironically, Australian consumers are not asking for much from their banks in order to meet their expectations. Data from DBM’s Consumer Atlas, Australia’s largest financial services survey with over 60,000 interviews per annum suggests the top three things that Australians consistently want from their banks are:
So, does the neobank business model provide a competitive advantage in delivering these three crucial elements of the consumer banking experience? Let’s look at them one by one.
1. Trusted to do the right thing
The Big banks have almost certainly lost the trust of the consumer, however neobanks have not had enough exposure or take-up in the marketplace yet to be regarded as trustworthy or otherwise. While these banks undoubtedly have been presented with an opportunity, they will have to gain public trust themselves before creating any real disruption in the market.
2. Have competitive prices with no unnecessary fees
The neobanks have a competitive advantage here. Having no physical branches results in a cost saving that can be passed on to the customer in the form of higher interest rates and lower fees. The Big banks will need to counter this competitive advantage through convenient service and process efficiencies, otherwise they may stand to lose out in this area.
3. Convenient ways to connect, good service and process efficiencies
There are pros and cons on both sides of the argument. While digital only, and in some cases mobile only, interfaces are the most preferred way for certain younger demographics to contact their bank, this does not hold true across the entire market. DBM data shows that there are certain customer segments, commonly the most profitable segments that prefer a human interaction. Convenience is a relative term and the branch foot print that the Big banks have is also one of their strengths.
The fact that there are no legacy systems and processes to slow things down could potentially result in neobanks providing faster service due to process efficiencies, however once they gain full banking licenses, they will be restricted by the same regulation and compliance requirements that tie the hands of the Big banks. Also, the Big banks have the resources to invest in the very same technology which neobanks promise to deliver.
When it comes to convenience and process efficiencies, it is a level playing field between neobanks and the Big banks.
Neobanks will only pose a serious threat to the Big banks if they continue to be complacent and ignore the voice of the customer. Australians already are and will continue to seek out other options if the traditional main players cannot demonstrate improvement and a willingness to meet the expectations of the public in the post-Hayne era.
Gazal Kapoor - Client Director, DBM Consultants
Sydney 5th April 2023 – Embargoed until 00:01 AM AEST on […]
A recent study of DBM Connect panelists reveals SME attitudes towards emissions, how their business is responding to the emissions challenge, and their expectations of suppliers and business partners.
By Tony Williams, Executive Director, DBM Consultants & Lucas Carreras, […]
DBM Managing Director Dhruba Gupta shares 2 fundamental things financial services marketers should know to boost marketing ROI.
With more people working from home since lockdown, expectations and attitudes relating to bill increases in utilities, telco and insurance have changed.
DBM Connect 2021 IWD Poll February-March 2021, sample size 1046.
When to DIY (your Market research survey) or not
While super funds will next year be held to a […]
Unlocks deeper consumer profiling, specifically for the financial services sector […]
DBM tracks financial services usage and behaviour monthly (for both […]
Dhruba Gupta, Founder and Managing Director of DBM presented the […]
The latest DBM Atlas data has revealed that renters are […]
While the implications of COVID-19 have only become apparent to […]
In a first for the Australian market, a survey of […]
5th March 2020 The 2020 DBM Australian Financial Awards were presented in […]
Eyeota, the leading audience technology platform enabling the intelligent use […]
DBM has today appointed Kipling Zubevich as CEO, tasked with […]
It’s 2020, and we’re celebrating with a brand new logo. […]
DBM are thrilled to announce being honoured at the Campaign […]
There's a new kid on the block targeting millennials living […]
For all the media coverage, chatter and Twitter emojis, do […]
The Winter 2019 DBM In Full Focus report – an […]
The financial confidence of both the general public and businesses […]
The latest DBM In Full Focus report - an insight […]
It’s no secret that 2018 was a tumultuous year for […]
The 2019 DBM Australian Financial Awards were presented in Sydney […]
Findings from ME Bank's 15th bi-annual Household Financial Comfort report (HFCR), […]
Trust in Australia’s big banks is at an all-time low […]
I can easily cite the statistics on women in the […]
New findings show an estimated 220,000 Australians intend to switch […]
Increasing numbers of superannuation customers are expressing their dissatisfaction with […]
AMP’s Net Promoter Score (NPS*) has plummeted 10 points since […]
According to the latest Consumer Atlas results, financial institutions separate […]
Research by DBM Consultants using Consumer ATLAS data reveals that […]
New results from DBM Consultants show that market share and […]
New findings from DBM Consultants’ Consumer Atlas reveal that fewer […]
Latest survey confirms damage done to Big 4 banks in […]
With the owner occupier mortgage market worth about $1 trillion, […]
You might find this hard to believe, but a sizeable […]
Investor property mortgages undergo high levels of scrutiny from the […]