Banking is changing, should you change with it?
Published on: December 18, 2019
2019 has been tough for the banks, and for the financial services industry in general. Off the back of the Royal Commission showcasing practices that didn’t cover the industry in glory, it’s seemed like they’ve stumbled from one PR nightmare to the next, culminating with the issues at Westpac in the past month.
So it’s fair to say that the general public isn’t particularly in love with the big four banks right now.
Which is why the rise of new digital banks, often called ‘neobanks’, has caught my interest. These digital banks have only been around now for a little while, with ING being the most prevalent. What is new is the rise in both the number of these banks and the range of services they offer. And given their digital-only make up, are we seeing a major shake up of the way we bank?
Say no to bricks and mortar
Think about how much you use online to bank today. I’m betting it’s pretty much 99% of your interactions with your current bank. Now try and remember the last time you went to a branch.
That’s the problem for the big four banks in Australia. They have huge footprints in retail bank shopfronts and all the associated costs that go along with them. Neobanks, on the other hand, exist online. Meaning that you interact with them digitally for just about everything.
One of these banks, Volt, has been incredibly active in recent times. A smart marketer as well as a bank, Volt just announced that they are launching a savings account with a set interest rate of 2.15% for balances up to $245,000. What’s interesting is the lack of ‘strings attached’ i.e. you don’t need to pay a minimum monthly amount or any of the other rules you see for most savings accounts. If you look at most of your big four savings options, the only way you can get a rate above 0.1% is if you meet a bunch of conditions.
What banks like Volt are doing is changing the way you use banking products. Being small and digital means they don’t have the heavy cost base of the bigger banks. This equals the ability to move fast and react to what their customers want.
Is it safe?
The first questions I’m sure you have are: Are they safe? And should I be rushing to the door to flick my current bank and sign up?
Firstly, from a regulatory perspective it’s just the same as any other bank. They have to meet the same stringent requirements from a legislative perspective. They have the same licence as any other bank so your cash is safe.
But are they a better option? Given that most of us run huge chunks of our life online these days I’d suggest that it’s certainly an option. Like anything though it’s worth looking at the specifics of what they offer and whether it suits you.
So my advice is to take a look. We‘d love to hear your thoughts, email me at email@example.com
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