SYDNEY (Reuters) – Australia granted a new banking license to online-only banking firm Xinja Bank on Monday, allowing the startup to compete against the country’s “Four Big” lenders that dominate the sector.
The license from the financial regulator allows the primarily mobile financial company to compete for deposits and use the funds to lend.
“We want people to have a real alternative to the incumbent banks,” chief executive and founder Eric Wilson said in a statement.
Xinja will grow its product line from pre-paid cards into bank accounts, and plans to add lending products in the first quarter of 2020.
Australia’s deposit and lending market is overwhelmingly dominated by Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank.
An inquiry by the country’s top economic adviser found that a lack of banking competition has been detrimental to customers.
Online-only banks are just starting up in Asia, as non-banking firms seek to leverage their technology and user databases to challenge traditional banks in offering services to retail and small businesses.
Last month, Singapore kicked off the process to issue up to five new digital bank licenses, while Hong Kong is set to see the launch of so-called virtual banks this year.
In the last year, the Australian Prudential Regulation Authority (APRA) has been more proactive in granting new banking licenses to competitors. Until now, Xinja only had a restricted banking license.
Last year, APRA granted its first license to an internet-only banking startup, Volt Bank. Other digital lenders to have received full banking licenses in the last year include Judobank and 86 400.
“I think there will be more to come, it’s early days,” said T.S. Lim, a banking analyst at Bell Potter, adding that fintech firms had not been real challengers of the major Australian banks so far.
Reporting by Paulina Duran; Additional reporting by Anshuman Daga in Singapore; Editing by Jacqueline Wong