What is a Neobank and what can it do for me?
Australia’s big bank monopolisation might finally be getting a kick up the butt.
This article is supported by Xinja, who are building the first Australian 100 percent digital bank designed for mobile. In this series, we look at our relationship to money.
It’s a very familiar story: at various times through the year, the big banks take turns in announcing another round of record-breaking profits. Last year the big four earned a combined $31 billion in profit. That’s $58,980 a minute. Unsurprisingly, the people that run these behemoth moneymakers do quite nicely for themselves as well. Australia’s highest paid banking CEO, Nicholas Moore, made a whopping $18.2 million last year. We can only hope that he at least shouted his mates a round.
Understandably, this annual event often causes its fair share of controversy. Are these companies and the people that run them too profitable? If private companies exist to make money, is there even such a thing as ‘too profitable’?
One of the surprising aspects of all this is that it seems to fly in the face of what we learnt in high school economics class. If super large profits are being made, then new companies should rush into the industry, igniting competition and forcing the existing players to drop their prices. After a while this should result in lower profits for the banks and lower prices for their customers. Although it’s not that simple.
The problem is that there are large barriers to entry in banking. You can’t just open a shop, stick a ‘bank’ sign on the door, and start doing business. Banks are really important to the economy so the government is incredibly strict about them. For a start, there are rules about who can even call themselves a bank. To legally put those four letters in your job description, you’re up for about $50 million in fees to get a banking licence.
To read more about what is a Neobank, please click on the link below…