- Australia’s digital banks have each now released their savings account rates, and – lo and behold – they are far better than the incumbents.
- More to the point, some neobanks argue, is they don’t come with the dizzying array of conditions the big banks attach to their headline figures.
- Below we compare just how it all shakes out.
- Visit Business Insider Australia’s homepage for more stories.
As of Thursday, all of the country’s newly-arrived neobanks have released their savings rates interest rates and – surprise – they all outstrip the big four banks. It’s proving to be the first major battle between the incumbents and the disruptors.
“Australians need a bank that serves their interests. We’re not like Australia’s existing banks: we are a true neo with a different culture and a different offering,” Xinja co-founder Eric Wilson said in a statement provided to Business Insider Australia.
Xinja’s new savings interest rate has just been set at 2.25%, putting them on par with fellow digital banks 86 400 and Up, which is wholly-owned by Bendigo Bank. Volt meanwhile will join them at the top of the market, paying customers 2.15% when it goes public in February. Volt is currently rolling out accounts to its 40,000 person waitlist.
Significantly though, Xinja and Volt’s come with no attached conditions, meaning customers can claim these without having to make a certain number of deposits, or refraining from withdrawing, to get the top rate. This, Volt founder Steve Weston told Business Insider Australia, is where the real difference between big banks and challengers lies.
“What percentage of the big banks’ customers actually get the higher interest rate consistently? The figure would be appalling. They would say they’re not breaking any rule but they would never answer the question,” he said.
“Yesterday’s banking you could get away with that sneaky shit. The banking of today says if you know the customers are getting a poor outcome, even if you’re not breaking any regulations, you need to stop. We can lead by example on this, and we can make a lot of noise.”
It’s a point on which competitor Xinja agrees.
“There’s no introductory period, no minimum deposit and no mandatory monthly top-up [with us],” Wilson said. “There’s no tricks or smoke and mirrors to the offer: put your money in, and get a great rate.”
Notably, 86 400 requires customers deposit $1,000 each month or its topline rate falls to 0.4% – a fact CEO Robert Bell defends.
“If you’ve deposited just $999 and the end of the month is coming up, we’ll send you a reminder to top it up to $1,000 so you get the bonus interest. What neobanks are really about is having the customers’ interest at heart, not our own profits,” Bell told Business Insider Australia previously
Up is in the same boat, requiring 5 or more card purchases per month, or its rate falls to 0.5%.
“Banking needs to rebuild trust. Right now people trust banks to not lose their money but, bloody hell, they can’t trust them to look after them beyond that,” Weston said.
The big four banks have laid a series of traps to exclude customers from their headline interest rate
As the cash rate gets cut towards zero, the big banks have been finding tricky ways to conceal their low rates.
Take NAB for example. The base rate on all its savings accounts is an anemic 0.11%. Its ‘iSaver’ account dresses that up with a 1.44% introductory rate that runs out the door after just four months. Meanwhile, you can claim 1.5% indefinitely in its ‘reward saver account’ unless of course you want to ever use that money – a single withdrawal from it, sees customers fall back to 0.11% quicksmart. I wish that was all. You also need to make at least one deposit every month, and it can’t be on the last day of the month.
All the big four banks pretty much follow the same disingenuous formula. ANZ gives you just three months at 1.6% while CBA and Westpac both offer 1.66% on their core savings products for five months. When those few precious months are over, all three then lump you with 0.1% for the rest of your natural life.
Besides this basic rate, each bank then offers another savings account in line with NAB’s ‘reward saver’ with an exhausting list of conditions that serve no other purpose than to prevent loyal customers from growing their savings.
Westpac, currently being investigated for 20 million breaches of the anti-money laundering act, is the most reasonable in this respect. It pays 1.2% as long as your balance is higher at the end of each month, or 0.45% if it’s not.
CBA’s ‘GoalSaver’ pays 0.89% on anything under $50,000, provided you top it up with $200 a month and don’t withdraw one cent of the money. ANZ will pay 1.6% as long as you make a deposit and don’t take anything out.
When you don’t meet these stringent conditions however, this whole rigamarole becomes farcical. Both banks pay a base rate of just 0.01%. That’s per year.
It’s hardly a sign of good faith. Just to be clear, if you were to forget to make a deposit on your account all year, ANZ and CBA would at the end of 12 months have paid you exactly 10 cents for every $1,000 you have with them. God forbid your bank interest is lost to a rounding error.
It’d almost be a dead-heat to the bottom of the pile if ANZ didn’t also charge $1 for any electronic transactions on the account.
You may as well kiss your precious 10 cents away right now.
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