Neobanks: Here’s Everything You Need to Know

Written by:

Katie Douglass


October 12, 2020

Last updated

August 12, 2022

Reading time

5 minutes

Katie Douglass

Katie Douglass is the Communications Manager at Oiyo and a writer. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology. At Oiyo, Katie is responsible for overseeing editorial strategy.

A new way for Aussies to bank

Does the word ‘neobank’ sound to you like something out of a sci-fi movie involving robots and artificial intelligence? Same here. That’s why we put on our research hat to find out everything we could about neobanks (and clear up any confusion about its link to The Matrix). In this article, we’ll run you through the basics of what we found and what the current market looks like for digital banks in Australia. So, let’s get stuck in!

What is a neobank?

In a nutshell, a neobank is an app-based digital bank. Unlike traditional banks, neobanks are completely digital and have no physical branches. Because they don’t have any physical infrastructure to deal with, neobanks are able to save on overhead costs. These savings allow them to offer competitive interest rates and charge minimal or no fees.

Neobanks are also bringing a fresh approach to how we pay, track our spending, and manage our money with their built-in smart technology. For example, Australian neobank Up offers nifty features to help you achieve your savings goals. This includes ‘Round Ups’ which transfers spare change to your savings account and ‘Pay Splitting’ which automatically puts aside money for bills or rent when you get paid.

Up Bank’s banking app. Image: Up Bank

Why the sudden popularity?

Neobanks have only recently arrived in Australia but they’ve been around for a while in other countries including the UK, Germany, and South Korea. This is because it used to be pretty hard for a bank to enter the Aussie market as it involved (very) strict regulations and high capital requirements to set up shop. However, then-treasurer Scott Morrison announced in the 2017 budget that the application process to enter the deposit market would be simplified. This introduced greater competition and innovation in a sector dominated by the big four banks. Fast-forward a few months and multiple digital banks announced their intention to launch in Australia.

Are neobanks safe?

It’s understandable if you’re wondering whether neobanks are safe to use — it is your money, after all. The good news is that neobanks are regulated by the same authorities as traditional banks.

In Australia, all new banks need to obtain a full Australian Deposit-Taking Institution (ADI) licence from the Australian Prudential Regulation Authority (APRA) before they can take money from customers.

This means if you are holding your money with an ADI, the government guarantees your deposit of up to $250,000 per person. Simply put, if anything were to happen to your bank, your money will be returned to you via the Financial Claims Scheme (FCS).

While most neobanks in Australia have an ADI, there are some that operate through their partner instead. For example, Up’s bank and savings accounts are issued through Bendigo and Adelaide Bank. But don’t fret — it still means any deposits up to $250,000 per person through Up are protected by the FCS.

Pros and cons

Want to know if signing up with a neobank is a good idea for you? To help you decide, here are some of the key pros and cons:


Competitive interest rates Because neobanks deal with lower overhead costs compared to traditional banks, they can offer competitive interest rates for savings products as well as lower or no fees.
Easy to use Neobanks allow you to do most of your banking through a smartphone app. This means you can access everyday banking, any time and anywhere. You’re not beholden to opening hours and can do your banking 24/7.
Manage your money better One of the biggest advantages with neobanks is how easy it is to manage your finances. Most neobanks offer detailed transaction histories including who you paid (including company names and logos) and where you paid. They also offer an insight into your spending habits with regular reports showing how much you spent and what you spent it on.
Travel-friendly Neobanks are designed to be travel-friendly with some offering $0 overseas transaction or ATM fees. Plus, they’re 100% digital so you don’t have to worry about the hassle of getting a separate physical travel card.


No physical branches While plenty of neobanks offer customer service tools including online and phone chat, there are no physical branches to visit.
Limited products As neobanks are still new in the banking sector, most aren’t yet offering a full range of products (e.g. loans and insurance) compared to traditional banks.

Popular neobanks in Australia

Neobanks are relatively new in Australia but they’re becoming increasingly popular and proving to be worthy competitors to the Big Four banks (Westpac, Commonwealth, ANZ, and NAB). In fact, Australian neobank Xinja gathered more than $100 million in deposits within just 19 days. While it isn’t as much money as the traditional banks deal with (usually in the billions), it still shows impressive growth.

Here’s a quick rundown of some of the main players across the neobank market in Australia:

Up Launched in October 2018, Up was the first neobank to hit the Australian market. Owned by Bendigo and Adelaide Bank, Up offers a banking and savings account.
Xinja Founded in 2017, independent neobank Xinja offers both a banking and savings account. Xinja has announced they’re planning to launch lending products soon with a home loan currently in the pre-beta testing stage.
Volt Established in 2017, Sydney-based Volt was the first neobank in Australia to obtain an ADI licence. Volt only offers a savings account but plans to launch a transaction account soon.
86 400 Launched in September 2019, 86 400 is owned by payments provider Cuscal and offers a transaction and savings account. In late 2019, they introduced variable and fixed rate home loans.
Judo Bank Based in Sydney, Judo Bank is targeted for small- and medium-sized businesses rather than individuals. They offer a range of products including business loans, home loans, and term deposits.

Want to learn more about banking?

To learn more about banking, be sure to check out our other articles on Oiyo. Whether it’s the best budgeting apps or savings accounts in Australia, we’ve got you covered with a number of helpful guides and interesting reads.

Discover our latest banking articles!

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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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