Incumbent banks have a difficult task ahead of them as they work to reverse a relied upon business model to meet customer expectations, says neobank chief executive.
Volt Bank’s chief executive Steve Weston told Investor Daily that the old model of the traditional banks was being challenged and there was a lot of work for them ahead.
“It is more difficult for banks to meet customer expectations because they’ve grown up where it’s all about product and distribution and it’s very hard to change that model,” he said.
Volt Bank was the first digital challenger bank to be granted a full ADI license in January this year and Mr Weston said what Volt offered was an understanding of customer needs.
“When a customer needs a banking product they would go to the branch and get that product and they would walk out with it.
“From that moment on they were left to their own devices to make the best use of that product. That’s not what customers need. Customers need banks that understand what they are trying to achieve in their life,” he said.
Mr Weston said banks told consumers that they looked after loyal customers, but their actions told a different story.
“If you are looking for a savings account with a major bank you can get 2.5 per cent for three to five months if you’re a new customer. You can’t access it if you’re an existing customer and then after three or five months that interest rate for the new customer will fall down to 0.5 percent which is terrible,” he said.
If banks really cared about their customers, they would stop relying on the old methods, said Mr Weston, and shake up their business.
“If banks genuinely want to put the customer best interest at the centre of what they do then things like honeymoon rates on deposit accounts would go.
“Incumbent banks have been relying on inertia and it’s difficult to get out of,” said Mr Weston.
The numbers weren’t on the incumbent’s side either, said Mr Weston, as new figures had most new customers looking at neobanks for their financial needs.
“If we look at the UK, which is a very similar market to Australia, the neobanks have been going just over three years and a survey at Christmas showed 1 in 4 millennials had a bank account with one of these digital banks.
“More tellingly more than 50 per cent of customers of all ages believe that they will have an account with a digital bank in three years,” he said.
Volt expects to roll out their products in the second half of this year said Mr Weston and the bank was looking to capture the Millennials when they do.
“Australian Millennials are the most likely Millennial population on earth to switch banks. Mum and dad may grumble but won’t switch, but Millennials are most likely to switch,” he said.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]