Sometime in 2018 Australia should get its first neobank, Xinja, breaking a long drought for genuinely new-to-market ADIs.
While the banking rules set out in the most recent government budget clearly help newcomers, other long-term trends make Australia ripe for banking disruption. The maturing millennial cohort is a driver, but so too is the embrace of mobile banking by all age groups.
GlobalData recently spoke with Xinja CEO Eric Wilson, who stressed that Xinja is really targeting those mobile-first consumers and early adopters. But who exactly are these people? When looking at the data from our annual surveys we find that first off there is a sizable proportion of Australians who are open to a digital-only bank, with 25% being willing to switch to a digital-only bank for their main accounts and a subset of 8% being very willing. Just taking into account the very willing, that’s just over 1.5 million Australian adults in 2017.
Of course, these digital enthusiasts aren’t spread evenly across the market. Younger Australians are clearly going to be a major source of Xinja’s customers, as that 8% figure for digital-only enthusiasts jumps to 13% among millennials and 14% among Gen Z. When we apply that to the market, we can see that only 30% of the potential customer base lies among millennials, almost the same proportion as the Gen Xers. Digital-only banking has become so pervasive in Australia that the real split in the market doesn’t occur until the mid-50s, a trend that lines up with the preference for mobile banking – and one recognized by Xinja.
However, not all of those digital enthusiasts are likely to switch; many will be perfectly happy with the digital offering from their bank. When this is factored we begin to see the real shape of the potential for neobanks like Xinja: just over half a million strong, with two fifths being millennials.
Given the emphasis Xinja places on its reimagining of the bank experience – being a digital app bank rather than a traditional bank with a digital interface – we expect it to appeal quite strongly to the typical switcher in Australia. As most switchers in Australia are motivated by poor service or perceived overcharges, integrating features such as personal financial management into the heart of its proposition that are designed to help customers manage their money better will be particularly well received. And that means a lot of appeal beyond just millennials, which is what makes Xinja potentially so disruptive, a new type of banking relationship – even before it launches its first product.
By Andrew Haslip, Head of Content for Asia Pacific