The new age banks going digital
It’s out with the old and in with the digital.
Virgin Money has offered credit cards, home loans, insurance products and superannuation.
Now it’s turned into a digital bank.
At the core of our proposition, is market leading loyalty, so the more products you have with us, the better you’ll be off,” Virgin Money CEO, Greg Boyle, told A Current Affair.
Virgin Money may have an ongoing savings rate of 1.2 per cent, but Finance Expert Effie Zahos isn’t convinced.
“Really to get the best deal, loyalty doesn’t pay. You’ve got to cherry-pick your products because each institution has a winning product, but may not necessarily have the best products all round,” Ms Zahos said.
Sign up to the app, create an account in less than five minutes and receive a credit card almost instantly.
“It’s a good thing for them raising customers, but you have to ask the question – what kind of filters are they going to put over the people who get the cards? Will they have a credit rate issue down the track? I think that’s something Virgin will have to face when we see how it operates over the next few years,” Economist Peter Switzer said.
Virgin Money said it’s all about loyalty.
“You’ve got the ability to earn points on everyday transactions, but you can also use them on an ongoing basis – so you can convert them to cash, or you can redeem them at over 100 Australian retailers,” Mr Boyle said.
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According to Mr Switzer, neo-banks are the new age banks.
“They don’t have branches, they typically have an app, operate in what we call the cloud. They have a banking license and have to operate like a bank and that’s a good thing for safety,” he said.
And there are other options in the market – starting with Judo.
“Small businesses have been largely mistreated by the big banks, so they thought it’s a market they would target,” Mr Switzer said.
“Volt’s another one – it’s been around for a while and targets younger people.
“Then there’s Tyro – when you go to a restaurant or a café, that terminal you whack your credit card onto is a Tyro terminal.”
The big banks are feeling the pressure, diving into the digital space app first.
“The Commonwealth Bank, what it does do well is digital banking and this product is very similar say to the market leader Afterpay, but you can use their product on just about every purchase that you want to tap and go,” Ms Zahos said.
Like with anything, one neo-bank doesn’t fit all.
“When we ask questions about where do you want to make your big financial decisions, we see big banks come out on top,” Taylor Blackburn from Finder said.