Earlier this month, Xinja Bank was granted its full banking licence by the Australian Prudential Regulation Authority.
Here, Eric Wilson, CEO and founder of Xinja Bank (pictured above), discusses the future of digital-first banking down under with Specialist Banking.
You’ve claimed you will shake-up the Australian banking sector. What innovation do you think is needed to change the sector?
It is not so much a specific innovation, but the injection of competition in the Australian banking sector that is needed to drive change. What has hampered innovation has been the oligopoly of the big four banks here. However, barriers to entry have eased, which is allowing new entrants, such as Xinja Bank, to have an impact.
Xinja is using state-of-the-art technology; we are 100% digital. We stood up our core banking system in 11 weeks at a fraction of the cost of a traditional bank, and our entire tech stack is designed to be nimble and flexible. The lower costs and far greater potential of the technology compared with the legacy systems of traditional banks will allow us to deliver better, more personalised services to our customers, and greater value, with lower fees, higher rates of interest earned and lower paid. Open Banking could, when it comes online, serve to accelerate the progress as customers, for the first time, will be able to move banks easily and are more likely to follow the new, better services available, which we hope will end up raising the standards everywhere. Aside from the technology, the key innovation needs to be in approach; Xinja Bank is designed in its customers' interests.
Our business model is based on a win-win — we think that if we look after our customers well and help them make more out of their money, they will stay with us longer, take out more products with us and recommend us to their friends.
Do you foresee the Australian banking sector following the digital-focused path that the UK sector has headed in? How do you picture the sector looking five years from now?
Yes, we do. As has been said many times, millennials would rather go to the dentist than the bank, and they do everything else on their phones, so it's time they were able to do all their banking on their phones, too. We envisage the entrance of several neobanks into the Australian market over the next few years, and the overall neobank market share rising to similar levels to the UK over that time.
You plan to introduce lending products in 2020. What products do you think Australian customers need?
Banks need to think beyond traditional products to new areas. In the short to medium term, we're facing a low-interest, low-inflation future, and traditional savings products — and relying on traditional housing investment — may well not be broad enough. To help people make more out of their money, we need to look at a variety of forms of investment, including cross border — such as multi-currency wallets — and those currencies could include more exotic assets, such as crypto. We also need better ways of borrowing and we're looking at a variety of models in this area. Credit cards are not on the agenda, however, due to their predatory nature and Xinja won't be offering one. We will look to invent a product that provides similar benefits without trapping customers in debt.
If you could change one thing about the banking industry, what would it be?
The lack of real competition — and I very much hope that's what we are doing.
How did you get into the industry?
I spent the first part of my career working for Accenture doing large-scale systems implementations, and then, after a bit of a break, ended up at one of the big four leading the implementation of the bank's response to the Future of Financial Advice (FoFA) legislation. After that, I ended up as the CEO of one of their subsidiaries. Two years passed, and I decided that I had had enough and was going to try to break the industry by starting a bank.
If you didn’t work in finance, what would you be doing?
Wishing I was in finance? Either that or being an absolutely terrible ski instructor... mostly because I’m rubbish at skiing, but love the mountains!
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