Australia’s next neobank, Douugh, says other players in the sector are ‘struggling’ thanks to their broken business model

Douugh CEO Andy Taylor (Louise Kennerley, AFR)
  • What could soon be Australia’s newest neobank, Douugh, has launched on the ASX.
  • The fintech company is set to launch its ‘financial wellness’ app early next year to help Austalians manage their money.
  • It comes as CEO Andy Taylor says rival neobanks are struggling because of their broken business model.
  • Visit Business Insider Australia’s homepage for more stories.

Australia’s neobanks have gone quiet during the pandemic, as low-interest rates and stalled launches erode their competitive advantage, but not Douugh.

The fintech appears to be breaking the mould for digital banks in Australia, as it cuts a very different path.

Not even launching a local product until 2021, the self-described’financial wellness’ app has already launched on the ASX, creating a strange situation wherein Australians can invest in a fintech that they can’t actually use.

While seemingly putting the horse before the cart, CEO Andy Taylor says the severe contrast with neobank competitors Xinja, Volt, 86400 and Up is actually very deliberate.

“If you look at Australia’s neobanks right now, they’re not building anything, they’re not solving a problem and their business model does not allow them to because they’ve got to get straight into lending on the mortgage side, and you can see they’re struggling,” Taylor told Business Insider Australia.

While his rivals might not agree with Taylor’s full assessment, they would have to acknowledge he has something of a point.

Both Xinja and Volt, for example, have tripped over themselves trying to dive into the mortgage market, a bank’s bread and butter. Without it, they have been left heavily reliant on early investment to remain liquid and as a result have had to reluctantly cut their superior interest rates back to size.

Xinja co-founder Eric Wilson likened it to being punched in the nose and acknowledged the bank has had to reassess and strategise anew since.

While the pandemic has no doubt played a role, Taylor’s critique goes beyond recent troubles.

“They’ve all taken carefree core banking systems off the shelf, you know, they’re outsourcing all their engineering. Really, they’re pretty hollow compliance frameworks,” he said.

Suffice to say, Taylor, the co-founder of peer lending platform SocietyOne, claims Douugh will offer something quite unique.

Financial wellness app

Taylor sees the opportunity, instead, in taking advantage of Australia’s new open banking regime and artificial intelligence (AI) to help customers.

“It has always been about asking how can we help people better manage their money and live financially healthier,” he said. “We’ll input all this data, train up the AI system to make your money work for you.”

“We have built that underlying platform and the next stage of that is for us to introduce wealth management into that and invest that money for you. And that’s what’s coming in the next six months.”

The Douugh app.

It’s an interesting development considering that Australia’s major banks have been pressured to sell off their own wealth management businesses in the wake of the 2018 financial services royal commission. The result, Taylor says, is an opportunity for a fintech to move into the vacuum they’ve left.

“We’re talking about putting you in the right portfolio to help you achieve your personal goal faster, and in a way that’s managed, diversified, and is not promoting you to speculate your money on single stocks,” Taylor said.

Not that it’s the only market, Taylor is eyeing, with a US launch date to come after the presidential election wraps up.

A different strategy

Douugh is clearly already demonstrating a very different tack in its approach.

While others spent years going through the exhaustive process of gathering a banking licence, Douugh has skipped that, instead deciding to partner with local banks. In Australia, it’s already signed a deal with Regional Australia Bank which will see it have a similar structure to Up, partnered with Bendigo and Adelaide Bank.

“We give that banking as a service partner exclusivity on the deposits. They provide us, if you like, with the bank account and the issuance of debit card. Mastercard gives us the exclusive debit rails on top of which we can build,” Taylor said.

Douugh’s approach will be to strike an exclusive relationship with a provider and then build a Douugh tool, as opposed to what Taylor says other neobanks do, which is to plug in existing products.

Not even its ASX arrival was conventional, taking place via a reverse takeover (RTO), whereby it took control of a defunct listing so that it could expedite the process of going public.

While Australians will have to wait until “early 2021” to actually take Douugh for a test drive, investors at least appear to like the line it’s taking.

Its Equitise crowdfunding round was filled within an hour of going live, raising $780,000 back in August. Meanwhile since going live on the ASX, its share price has quintupled to 30 cents per share, as it bounces around.

“Being a hot stock in a hot sector will obviously bring volatility. Our job is to keep working as we always have to get Douugh into US customer’s hands in the next few weeks – that’s how we will deliver value to our shareholders,” Taylor said.

That’s when consumers will finally be able to see if Douugh is set to rise or fall.