Fintech Insider Podcast by 11:FS
00:30:32 · Sarah Kocianski
[00:30:32] S1: So we we know how I feel about the Australians. You know? They... I'm I'm very, very fond. I think... I I actually think that it is spin, but I also actually think it's the right decision. Because the reason that, you know, Zynga has has this rate out there, and I should point out as well that most of the neobanks in Australia have similar rates. So 80 6,400 and up both have the same 2.25% rate. That's the rate when you add up the base rates. The base rates are about point 4.5%, and then you have like a bonus rate, which you get depending on whether you adhere to certain rules. So 86,400, you have to deposit $1,000 a month. Up, you have to make five deposits per month into the linked payment accounts. You can't just have a savings account, you've got to be using the linked current account, if you like. So they they... Basically, it's a market standard out there for for the near banks. Volt is another bank that's got 2.15%, but, you know, it it... It's up there. It's good if you think about the rates that we're seeing over here. And those aren't those aren't fixed term rates. Those are easy access rates. So Zynga has done this, you know, as the other banks have done to gather customers, to get customers through the door, to get customers using its product. And, you know, obviously, off the back of that, to start getting their feedback to see, you know, what they should be doing next. The last thing it wants to do is let go of all those customers and all those deposits that it's successfully accumulated by slashing the rate. Because those other banks are offering the same rate and haven't cut theirs yet, and I will say yet. The minute it cuts that rate, all that's gonna happen is those people are gonna go to 86,400 or go to up, and it loses that advantage it's gained. So whilst I do appreciate that it could be viewed as spin, I actually think it's a very sensible decision. And And I think if also to go back to your point, Ross, about just how much they've accumulated, like 350,000,000 in dollars, they are very, very close as far as I understand it to launching their mortgage product. So they don't wanna be giving up that deposit just as they're on the cusp of launching a lending product, which they comprise very attractively because of aforementioned rate cut. So I think there's two things here that are interesting to me.
00:32:33 · Sarah Kocianski
One is that the Australian market is a little bit unusual in this sense that all the banks have gone for such high interest rates. So over here, the neobanks used free travel as kind of the the catch to get you in. The Australians have gone for high interest rates as a catch to get you in. So that's unusual. And then also, you know, kind of the way that the way that they've done it, I think, is is to be applauded, actually.
00:32:55 · Valentina Kristensen
[00:32:55] S3: I mean, I I guess I I don't really get the strategy. Right? I mean, I understand, okay. Fine. They're trying to raise these deposits because they're looking to lend out in the future, but it's very expensive. Right? I mean, they said the the 350,000,000 that they've they've raised is gonna cost them $7,500,000 per year, you know, in in annual interest costs. So they have to kinda start deploying that capital pretty quickly. I think when you're a bank like Marcus or a player like Marcus, you've got incredibly deep pockets because you're obviously coming from Goldman Sachs, then it looks super strategic offering a a rate that's sort of miles ahead of others in the market to attract those those customers in because you can afford to do it for the next year, and then rates will drop. I kind of feel like if you're doing it now, you know, as soon as you come into market, it just looks a bit amateurish, you know, like, you're the the new guys who supposed to be coming in build... Building a professional new banking sector, and you're actually then... The only way you seem to be able to differentiate is by being either the cheapest or by offering, you know, the the the best rate.
00:33:55 · Pranav Sood
[00:33:55] S2: Yeah. I think that's a really interesting point. It it is a a bit weird that the only thing that you can differentiate on is is exactly that, the rate. It's quite interesting to me because yes, they've got $350,000,000 in deposits after two or three months, which is fantastic. But that's still a drop in the ocean relative to what the big four banks in Australia have got already, right? And you'd expect and hope that by providing something a little bit better, either from a digital experience or a user journey perspective, that you could differentiate enough to win some more of that, you know, dollars 500,000,000,000 worth of, you know...
00:34:28 · Sarah Kocianski, Pranav Sood
[00:34:28] S1: Yeah. So I need to counter that and say that the Australian big four banks have some of the best apps in the world from incumbent banks. So in terms of differentiating from user experience, that is incredibly difficult over there. Because everything that Monzo did over here, the big four Australian banks have already done and done it better. But also, I do understand what you're saying, you know, it kind of... It doesn't it doesn't speak much to them. The other thing you have to... I think about the Australian market is that mortgages are the biggest thing in Australia. They are more obsessed with property perhaps than the Brits, and that's saying something. So they kind of... I think their strategy is they know that mortgages are the big goal. They know that consumers are really, really unhappy with the big four banks. They know that the big four banks are being punished at the moment on the mortgage side because of the mess ups they've made. So that's what they're trying to get to. Sorry. I was just gonna say if you look at Judo Bank, which has a model actually quite similar to Oak North, they've got, you know, fixed term accounts for for two point... 1.5% for five years, which isn't actually as good if it's these easy access accounts, which suggests that it is that mortgage side that they're trying to pull deposits in for. [00:35:33] S2: Yeah. No, I was gonna I think you basically said what I was gonna say, which is... Sorry. [00:35:36] S1: No, it's fine. I'm gonna be defensive about the Australians.
00:35:36 · Sarah Kocianski, Pranav Sood, Ross Gallagher
[00:35:36] S1: No, it's fine. I'm gonna be defensive about the Australians. [00:35:38] S2: No, but the other thing about Australia is that if you are going to pick a time to innovate in financial services, now is that time. All of the factors that you need, you know, the banks getting knocked up and down the high street by the Royal Commission, all the other stuff that's going on. And so I agree with you that yes, CBA and others have got pretty good digital apps, but they're also in the middle of an absolute bun fight right now. And so I think I just go back to Val's point which I kind of agree, you should be able to differentiate on more than just the rates that you're paying. [00:36:05] S0: It's easy to be cynical though isn't it? Mean look I totally take your point, future parity isn't parity. And when you've got someone saying we're trying to change the traditional banking model but actually they're relying on the same old acquisition hooks that all of the big banks rely on, it's easy to be cynical. But at the same time, I think you wanna believe in that sort of ambition and that they are actually trying to do something that... That's different.