Neo banks are gaining ground in Australia. Especially with the millennial crowd who are eagerly adopting their competitive rates and customised financial experiences.

But what exactly are neo banks and what can (and can’t) they do for you?  

What is a neo bank?

Neo banks are fully licensed and regulated banks that operate entirely online. Everything you do with a neo bank happens within the app - there are no physical branches.

They generally offer savings, transaction, prepaid spending accounts and, in some cases, loan products. 

Neo banks began popping up in Australia in 2018 after regulatory shifts allowed them to compete with traditional banks.

Since then, they’ve been taking on the big guys - Commonwealth, NAB, ANZ, and Westpac - with competitive interest rates and slick digital customer experiences. 

While they might be fairly new to Aussies, neo banks have been around for years in other countries, including the UK, Germany and Brazil. 

 

What’s the difference between a traditional bank and a neo bank?

You’ve probably guessed the most obvious difference between the two. Unlike traditional banks, neo banks don’t have physical branches.

This 100% digital presence is what gives them an edge when it comes to fees and interest. 

Without the overheads of running a traditional bank branch, neo banks can operate at a fraction of the cost. They pass the savings onto customers with zero or low account fees and competitive interest rates.  

Neo banks are also kicking digital butt when it comes to a personalised customer experience with tools like auto-saving, real-time spending alerts, bill prediction, and voice banking.

They’re serving up innovative and exciting tech so quickly that traditional banks, caught up in bureaucracy and old school legacy systems, are struggling to keep up.  

That’s not to say neo banks don’t have tech hiccups. A few of the most popular neos have come under fire for service glitches frustrating users. 

While you typically won’t have an issue applying for and opening an account, once you’re up and running you may experience some technical issues and longer resolution times to have them fixed. 

Traditional banks have been around for a long time and have ironed out a lot of tech issues while neo banks are still finding their feet with their infrastructure and support processes. 

Product offerings also vary between neo and traditional banks; we’ll dive into those differences in a moment.

 

What are the neo banks in Australia?

Some of the current and most popular neo banks operating in Australia include:

86 400 

Douugh

Hay

Revolut

Transferwise

Tyro Payments (Business banking)

UP

Volt Bank

Xinja

Judo bank (Business lending) 

You can expect new options popping up as their popularity in Australia continues to grow.

 

Neo bank financial products: What they do and don’t offer

Competitive rates, no more lunch hour bank queues, and tech that *actually* helps you get your money sorted. 

Neo banks definitely have a number of enticing benefits in their corner.

But before you whip out your phone and hit download, let’s see what products neo banks generally can and can’t offer you.

Products offered

  • Savings accounts
  • Transaction accounts
  • Prepaid spending cards
  • International money transfers

Home loans are a fairly new arena for Aussie neo banks but a handful of them are pushing into the mortgage market too - watch this space. 

Not offered

  • Credit cards and associated rewards programs
  • Superannuation and investment products

So, how safe is stashing your money with a neo bank? As safe as a traditional bank. Neobanks are regulated by the same authorities - APRA and ASIC - so your finances and personal details are secure.

Pros and cons of a neo bank 

ProsCons
Competitive interest rates.Limited product offerings compared to traditional banks. At the moment, credit cards aren’t available and only a few neo banks offer loan products.
Low or no fees on standard banking transactions.No physical branches. This might be a pro for some but not if you prefer to do banking in person.
AI driven in-app features to help you get better at managing your financial life.There are limitations to their services. For example, Xinja currently provides the ability to make payments only via direct debit, but not by BPay. While 86400 provides customer support only between Monday to Friday, not on the weekends.

Is a neo bank right for you?

A neo bank could be a good choice if...

You want a no-fee savings account with a competitive interest rate

Simple low cost accounts with interest rates that usually beat the market might be a faster way to grow your savings.

You’d love help keeping your financial life in order

Traditional banks can help you track your finances digitally within their apps but neo bank AI really takes it to the next level. 

You’d rather spend your time anywhere else than in a bank 

With all transactions happening in the app, you may never have to set foot inside a bank again.

On the other hand, you might stick with a traditional bank if...

You want access to credit card reward programs

Credit cards aren’t offered (yet!) by neo banks in Australia. If you use credit cards to manage your bills, travel bookings, or simply want to take advantage of the range of reward programs on offer, traditional banks are still your go-to. 

You’re shopping for a home loan

While some neo banks do have (limited) home loan offerings, if you’re shopping around for a home loan it’s a smart idea to cast your net wide with both traditional and digital products. 

You want face to face customer service and problems fixed - fast.

If walking into a bank for “old fashioned” customer service is your thing, a neo bank won’t deliver. Traditional banks can usually offer a more expedient resolution to service issues either online or in person.

You’d find the service limitations of some neo banks frustrating

As pointed out above, not all neo banks offer services like Bpay, Apple Pay, and Google Pay and some can take days to complete a simple money transfer.

Of course, you can always have the best of both worlds and manage your financial life between the two!

 

Check out other similar articles:

Afterpay vs Credit Card: Which is actually better?

NAB StraightUp vs Commbank Neo: No Interest Credit Cards

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