Young Generation Clambers to a New Wave of Digital Banks

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Young Generation Clambers to a New Wave of Digital Banks

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SYDNEY, Australia – A new wave of digital banks are becoming more appealing for all the young savers in the country.

The younger generation is app connoisseurs, and that includes when dealing with their finances like savings accounts and credit cards as well. They are flocking to a new wave of neobanks that are setting their sights to take a massive part of the market share that the traditional banks in Australia currently holds.

There are now over a half a billion dollars worth of deposits that are flowing towards online digital banks such as 86 400, Up, Xinja, and Volt.

The new wave of digital upstarts is attracting the much younger crowd with various offerings such as easy and quick account sign-ups they can do online. Most of these digital banks also offer services such as digital payments, grouped transactions, and recurring bill reminders. They also provide one of the widely used resources for young savers in terms of personal finance, which are budgeting tools. It allows every saver to track how much they are spending.

Notably, 86 400, is planning towards starting with recommending savings options and analyzing electricity bills, among the many services they are currently offering.

According to the general manager at the FinTech Australia, Rebecca Schot-Guppy, the younger generation of savers favor digital banks for the convenience they offer.

She said that young savers are also extremely credit savvy and come with preparedness to pay for their purchases using “buy now pay later” payment options. BNPL services are among the typical payment schemes that are part of most neobanks right now. Ms. Schot also said that digital banks also provide the young generation some valuable insights when it comes to their spending habits, which a lot said is very useful.

Digital bank Up also said in a statement that over half of its current 165,000 customers are those belonging at the age of 16 years old to 24years old. The neobank also stated that the current account balances from their customers are at around $172 million. The recent figure went up by more than 400% from the account balances last year, said Up.

Anson Parker, the head of product for Up, said that the young generation is what most consider as app connoisseurs. They can easily differentiate which are well-designed applications from those that are not, he said. Mr. Parker added that young savers are also expecting more from the apps they are currently using and are doesn’t have any second thoughts about trying something new.

He also said that, at Up, they had made savings a lot less tedious and difficult. Mr. Parker commented that they are currently using fun features in their apps, such as a pull-to-save functionality. He said that it makes it possible for savers to set up pay-splitting automatically or round-up their spare change.

On the other hand, the newly launched Xinja Bank is making a massive wave in the digital bank world. After one month of getting public, Xinja now boasts over 21,500 customers and covers around $245 million in deposit accounts.

Eric Wilson, the chief executive officer and founder of Xinja Bank, said that its launch is two times as successful and they previously expected. He also stated that more than half of their deposit balances came from the four of the biggest banks in the country.

The massive growth for digital banks like Xinja suggest how customer are becoming more open to embracing the new wave of digital banking services, said Mr. Wilson. Other neobanks are putting together more than hundreds of millions worth of deposits from their new customers as well. And while these figures are still tiny compared to the billions worth of deposits in Australia’s banking giants, it is worth noting that neobanks are still only a couple months old.

He said that the young generation is becoming sick of dealing with the banking industry. Mr. Wilson added that most of the young savers don’t appreciate getting new banking products and brands from old traditional banks and call it something new.

Maria Loyez, the chief customer officer of Volt, also said that the younger generation is what they call the digital natives who favor the convenience of mobile experience. She stated that young savers are far less inclined to tolerate unnecessary financial products that don’t work for the best interests of their customers.

One digital bank customer from Sydney, Phillip Vassallo, 18, is currently fresh out of high school and does part-time work in retail before going to university to take finance. He is a previous customer of all the four giant banks in the country before shifting to digital bank Up several months ago.

Mr. Vassallo said that upon switching to Up, the sign-up process was speedy and only took several minutes. He also noted that the debit card he got from the digital bank also came in a very colorful package, which adds to the overall quality of the product. Overall, he commented that banking with the new wave of neobanks is different than traditional banks, and it’s something he prefers to do.

Neobank is a new way to save in Australia. As some parts of the banking world start to shift, more people ate going from the four of the biggest banks in the country like NAB, Westpac, CommBank, and ANZ to digital banks.

For one, 86 400 is one of the newest neobank in Australia. It fully launched in September last year, and the month following that, it became the first digital bank in the country to offer home loans.

Meanwhile, based on the results of the Accenture survey in 2017, there is a surge in joining neobanks, especially for young people. The study identified young savers as the “nomad,” which is the new kind of banking customer according to the findings.

According to the report, nomads or young savers have a much bigger preference for using digital channels, which includes banking. It also said that they are not loyal to a single product or brand and represents a massive opportunity for new entrants to help them boost their market share.

Based on the report, the younger generation is looking to be a $2 trillion market in the digital banking world in the coming years.

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