Challenger banks hit back at 'delusional' claim from fintech investors

Neobanks have rebuffed venture capitalists who doubt they will ever take significant market share from the ”big four”.

A bold rejection of the business model of emerging digital-only banks was made by seasoned fintech investor Rajeev Gupta, partner at Alium Capital, at the Credit Suisse Australian Fintech Forum on Thursday.

“[The valuations on Australian neobanks] are delusional because the response to any serious competition from the big four is going to be fierce,” Mr Gupta told a session where venture capitalists discussed where Australian fintech’s next $1 billion-plus “unicorn” company would come from.

“The neobanks don’t stack up in our view. The only reason anyone will switch to them is if they can offer a better deposit rate or a lower lending rate. I deal personally with two of the big four and they have improved immeasurably on that in the last 24 months.”

However Luke Bunbury, co-founder of Volt Bank which was first to receive a restricted authorised deposit taking institution licence after the prudential regulator introduced them in May 2018, said competing on price was part of his strategy.

“Yes we expect Millennials to dominate our customer count, but you don’t have to be 35 to not want to walk into a bank branch,” he told a later panel of challenger bank executives.

“We see our balance sheet being dominated by pre-retirees with a huge mortgage at Commonwealth Bank, who today are paying 80 basis points more than they should be.”

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Source: Challenger banks hit back at ‘delusional’ claim from fintech investors