By Nicola Greenberg

Australians are familiar with the concept of “non-banks”, and have even seen an example of a “beta bank” (U-Bank).  Other forms of “challenger” banks, such as neobanks and new banks have been absent from the Australian landscape until more recently.A “Neobank” generally relies on a bank with a banking licence to support its other offerings, and a “new bank” aims to get its own banking licence.  These types of challenger banks have been popular around Europe for some time, but Australia’s strict regulatory regime and the need for substantial capital to become an Authorised Deposit-taking Institution (ADI) has kept barriers to entry high.  This meant that creating a new bank wasn’t seen as an affordable, or a worthwhile investment for neo and new banks. With APRA’s introduction of the new “restricted” ADI licence earlier this year, Australia is experiencing its first wave of new banks.

What is the licensing change?

The genesis of this change was the Financial Services Inquiry report, which identified a lack of banking competition, which it attributed to a number of factors, including the high barriers on new market entrants. This concept became politically attractive in the context of calls for a Royal Commission, Treasurer Scott Morrison announced in the 2017 budget that the Government was focused on encouraging increased competition and innovation in the banking sector. On 4 May 2018, APRA responded by releasing its Information Paper on ADI licensing: Restricted ADI Framework (Information Paper). It describes the rules behind applying for a Restricted ADI licence, and importantly for potential new market entrants, the lowering of capital requirements from $50 million to $3 million.

This proposal received some criticism, as it limits Restricted ADIs maximum deposit holdings and activities, but on the flip side, APRA needs to balance innovation with trust and control, particularly where consumer money is concerned.

A Restricted ADI licensee can conduct a limited amount of banking activity while simultaneously developing their capabilities and resources to pursue a full ADI licence. Despite the fact that this licence may only be held for a period of two years before becoming a full ADI (or leaving the market), over 10 market participants have either applied, or are preparing their licence application.

Who are Australia’s new players?

The three challenger bank entities who are (publicly) first off the block are Volt, 86400 and Xinja. Each promises to create a faster, more efficient customer experience, but each have a slightly different ethos, focus and marketing strategy.


Volt received the first Restricted ADI licence in May 2018. Volt boasts a strong offering, reporting over 35 staff and reportedly raising nearly $16m in equity capital via three funding rounds. Volt is yet to release any banking products to the public.  One of its tech hallmarks, use of facial recognition technology, is reportedly still being finalised for customer use.


Xinja has hit the ground running with its customers, launching prepaid Visa cards, and obtaining an Australian Credit Licence so it can provide home loan products.  Speed and efficiency is a focus of the Xinja messaging, with its home loan products designed to provide approval in 20 minutes from application.  It also prides itself on its app, which promises to help customers keep better track of their finances with spend categories and daily spend allowance, and, consistent with the Xinja branding, “lots of emojis”. The Xinja brand is focused on bringing the fun back to banking, with glow-in-the-dark cards, and friendly, emoji-filled advertising.   While Xinja does not yet have its Restricted ADI licence, it has made its intentions clear that it intends to seek one.


86400 (the number of seconds in each day) is created by Cuscal, an established ADI that provides payment systems for banks, credit unions and other financial services providers.  Interestingly, reports about 86400 indicate that it is going straight for its full ADI licence, which it hopes to have by the end of the year. It plans to offer a transaction and savings account to customers in 2019, which promises its customers (sensing a theme here) control, efficiency and personalized banking on the 86400 app.

What now?

It is clear that these new players have their eyes set on efficiency and customer service.  It is likely they will soon have a new suite of products for Australian consumers to test.


Tony Coburn
Tony Coburn
+61 2 9322 4976