Neo Banks – The new wave of digital banking

Neo Banks- The new wave of digital banking

Neo banks are all the rage. We love getting a good deal and with us becoming more and more tech savvy, the switch to digital banks is appealing. However, are they really that good?

For those of you that may not be aware, neo banks are fully digital and generally run through an app. Some may have links to one of the major banks, but a majority are recent start-ups targeting the new wave of millennials that want to deal with their finances on the go, and at the best rates possible. Being fully digital is how they keep their costs down and offering you great interest rates.

They do all the same things as a physical bank. Place your money in a savings account that earns interest, lends you money and encourages you to save and manage your finances.

In Australia, we have:

Up bank

Founded in Melbourne in 2018, Up is owned by Bendigo Bank/Adelaide Bank providing security to your money. It offers range of budgeting features with no monthly fees. With up to 1.85% p.a. earned on your savings and bonus interest available on multiple savers, it makes saving easier with insights and real-time reports.

The app has features that allow you to boost your savings with round-ups and pay splitting into different accounts to making saving easier. It makes it easier to track your money by showing the actual name of the company or person you transferred money to or paid, as well as their location. With the upcoming bill predictor, Up learns your regular charges and lets you know when one is due again meaning you won’t forget it.

As for fees:

  • No international fees
  • Free domestic ATM usage with most major banks
  • 11.23% p.a. Overdrawn interest rate

Xinja

An Independent Sydney based institution, Xinja also offers features to ensure you pay your bills on time, know where your money is at and build your savings. It is a full Authorised Deposit-Taking Institution (ADL) meaning it is 100% safe and covered by the FCS (Financial Claims Scheme) meaning your maximum $245K balance per customer is protected.

Range of products from debit cards to savings accounts that you can lock and unlock with a 1.8% p.a. interest rate calculated daily and paid monthly. However, they pay a tiered interest rate on stash savings accounts but no interest on the standard bank account.

Being forward thinkers, the have a road map for future products and features with loans coming soon (late 2020 hopefully)

Their fees:

  • No international fees for currency conversions and international ATM withdrawals (the ATM provider may still charge something thou)
  • Free domestic ATM usage with most major banks
  • One free replacement card each year, $10 after that and $30 courier fee should you need it in a rush.
  • Should you have a dispute, you may be charged $10 and then $15 per investigation- both charged at their discretion

Volt

Set up in 2019, Volt is the nearest to releasing loans and credit cards but no details available just yet.

With an interest rate of 1.65% p.a. paid regardless of balance, on accounts with a max of $245,000 also guaranteed by the FCS, they entice you continue savings with a savings challenge. You set the amount and they remind you to do it six times to form your savings habit, thus build your balance.

86 400

There are 86 400 seconds in a day, so make them count. That’s their motto.

86 400 is also a Sydney Based neo bank with ADL that also promotes savings and budgeting assistance. They also pay 1.85% p.a. on all Save accounts when $1000 or more is deposited each month.

We love the fact that they have an Australian call centre and all electronic ID checks and signatures. No need to wait for your card to arrive, 86 400 is Google and Apple Pay compatible, as well as Osko.

Moreover, they have home loans!!! Both fixed and variable rate loans, Principal and Interest as well as Interest only, all with no minimum redraw amounts and no fees.

With rates from 2.98% (fixed) and 3.02% (variable) for P&I owner-occupier loans, investors are covered too with 3.29% (fixed) and 3.36% p.a. (variable) all comparison rates, they are worth contacting.

Fees:

  • None- not even on international card payments
  • No ATM fees except those charged by the bank
  • Free replacement cards in Australia and $7 for express post and $50 emergency Visa replacements card or cash

Judo

Businesses (Small to Medium) are not left behind. Judo offers Business loans, lines of credit, equipment loans and finance lease options. They have been granted a full unrestricted banking licence since April 2019 and are also guaranteed under the FCS.

As for business banking, they offer a range of personal, Business and SMSF Term Deposit options.

Business lending rates starting with a Base rate of 0.14% that is repriced monthly as the average of the last 5 business days of the prior month’s BBSY (Bank Bill Swap Bid Rate).

Then their Term deposits have option of paid at maturity, monthly or annually starting form 1.35% p.a. for 3 months to 1.95% p.a. for 5 years, they are placed to compete with the big banks. Just be aware that they may charge you for breaking out your money before the agreed time.

 

Neo banks, although small in size are quickly building their value to be in excess of $1.6 billion in assets. As their popularity increases, they will certainly make the big 4 sit up and take notice. They set themselves apart by having transparent costs at your finger tips with loans approved faster and easier.

So, if you don’t see the need to enter a bank, then neo banks may be an option for you to build your savings or get your business loan.

With advancements ahead, they may just be the face of banking for the future.

 

Developing your financial literacy will give you the freedom to achieve your life goals.

 

* All quoted rates were correct as of June 28, 2020