How crowdfunding is supporting the creation of Australia's first, 100% digital (soon-to-be) bank
In the last few years, as part of the fintech revolution, countries like the UK and US have seen the rise of neobanks, which are changing the way banking services are managed and provided to users.
Neobanks differ from traditional banks as they offer a 100% digital and mobile-first banking experience. Thanks to the latest fintech technologies, they have no branches, bringing down infrastructure and other banking costs. The result is that neobanks can offer competitive rates and lower fees to their customers. Moreover, from a customer experience point of view, they emphasise online or by phone customer support and they make their services easily accessible and highly interactive. For more information on what neobanks are visit Xinja's blog.
What is the growth opportunity for neobanks and what is the role of crowdfunding?
From the US's Final to Brazil's Banco Original and over to Germany's Fidor, the proliferation of neobanks is affecting both the European and the global landscape. This is a result of their focus on customer-centric services, helping customers to better understand the banking process and how to manage their money. This is challenging the traditional banks who have been criticised for their stagnant customer service approach.
"Banks do essential. They construct products, such as checking accounts, saving accounts and credit products. Those products stay the same for some time, in the way they develop and manage them. What's dramatically changing is the digital experience platform, on which banks need to interface and interactively engage with customers, which we believe is a separate and distinct business."
London is the heart of this revolution as the UK regulations are working to stimulate greater competition in consumer banking services. This has seen a growing number of startups apply for banking licenses. Since 2013, 15 companies have been granted the license which is now easier to obtain. It was estimated that another 20 companies were going through the process of applying for the license.
Looking at the leading neobanks in Britain, we can see how crowdfunding has been instrumental in the growth of these innovative digital banks. Founded in 2015, Monzo, the bank that places smartphones at the centre of the banking experience, achieved the fastest crowdfunding raise in history, raising £1 million in 96 seconds. In total, the company has raised £105,692,840 in 7 funding rounds, two of them through equity crowdfunding for a total value of £3,392,840. The London based Revolut, a platform that aims to manage money all around the world, also raised $86,445,269 through eight funding rounds, two of which were equity crowdfunding, raising respectively £1,000,000 and $5,300,000.
These are only a few cases that demonstrate the confidence traditional and everyday investors have in neobanks and how crowdfunding is a real option for aspiring digital-banks who seek capital to grow. If you would like to get a broader overview, Techfoliance, the global platform dedicated to FinTech, offers an interesting mapping of the Global Neobank Landscape.
Jumping to our side of the world, Australia is also following this global trend, as the new Australian crowdfunding legislation, passed in September, allows all Australians to invest. Equitise has applied for the new CSF license and are awaiting a decision. When approved, they will launch their first offer with Xinja - Australia's first fully digital (soon to be) bank.
As Eric Wilson, Chief Executive of Xinja, said:
“Xinja is all about creating a new kind of banking experience - and crowdfunding is part of that. If people want a new kind of bank, this is their opportunity to build their own.”
It seems that the year 2018 will bring additional good news for companies like Xinja. The Australian regulator (APRA) is planning to change the way aspiring banks are licensed. Usually a banking license is only acquired if $50 million in capital has been raised. A new APRA “restricted” license will allow fintech start-up banks like Xinja to begin operating with $3 million in capital.
If you would like to be part of this revolution and be one of the first to own a piece of Xinja, visit our platform Equitise to get early access to Xinja’s offer!
Like any investment, Crowd-Sourced Funding (CSF) is risky. Investors may lose their money and the business may not achieve its objectives. You should consider the CSF offer document and the general CSF risk warning contained in the offer document in deciding whether to apply under the offer. Information about this offer will be set out in our offer document which will be available as soon as the offer opens. You should read this to understand potential risks before deciding to invest.