Australia has granted a banking license to Xinja Bank which is a new startup which will only be available online. This new license allows the new startup bank to compete for deposits and use these funds to lend to others.
Australia’s lending sector is being dominated by the “Big Four” as experts call them, so it will be interesting to watch what Xinja has to offer. These companies are Commonwealth Bank of Australia, Westpac Banking Corp, Australia, and New Zealand Banking Group and National Australia Bank.
One of the main reasons why Xinja has been granted the license might be because of an inquiry by the country’s top economic advisor. He found out that a lack of competition in the banking sector is actually disadvantageous to customers.
“We want people to have a real alternative to the incumbent banks,” said the founder of Xinja, Eric Wilson.
At first, the company will offer pre-paid cards into bank accounts. Later, they plan to add lending products, but that will probably happen sometime in the first quarter of 2020.
Online banks as such are only now popping up in Asia, as non-banking firms seek to leverage their user databases and technology to challenge the traditional banking system.
In other countries – Singapore has started the process to issue as much as five new digital bank licenses. Also, Hong Kong announced that they are moving towards a cashless society and they are about to launch multiple virtual banks.
However, the Australian Prudential Regulation Authority (APRA) has been quite active in issuing banking licenses to new companies. Last year they issued the very first banking license for an online-only banking startup called Volt Bank. Xinja, up until now, had a restricted banking license. Also, the APRA has issued full banking licenses in the last year to Judobank and 86 400.
Additionally, T.S. Lim, a banking analyst at Bell Poter, believes that this is only just the beginning. While currently major Australian banks aren’t challenged by the few uprising fintech startups, T.S. Lim believes that soon this might change, saying:
“I think there will be more to come, it’s early days.”