SYDNEY • Australia granted a new banking licence to online-only lender Xinja Bank yesterday, allowing the start-up to compete against the Big Four banks that lead the sector.
The licence from the financial regulator allows the primarily mobile financial company to compete for deposits and use the funds to lend.
"We want people to have a real alternative to the incumbent banks," Xinja's chief executive and founder Eric Wilson said in a statement.
Xinja will grow its product line from prepaid cards to bank accounts, and plans to add lending products in the first quarter of next year.
Australia's deposit and lending market is dominated by Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group, and National Australia Bank.
An inquiry by the country's top economic adviser found that a lack of banking competition has been detrimental to customers.
Digital or online-only banks are just starting up in Asia, as non-banking firms seek to leverage their technology and user databases to challenge traditional banks in serving retail and small businesses.
Singapore kicked off the process last month, with the Monetary Authority of Singapore announcing that it is now accepting applications for new digital bank licences until Dec 31.
It will issue up to two licences for digital full banks, which can take retail deposits, and three for digital wholesale banks, which take deposits from small and medium-sized enterprises and other non-retail segments.
Successful applicants will be unveiled in the middle of next year and are expected to commence business by mid-2021.
Hong Kong is also set to see the launch of so-called virtual banks this year.
In the last year, the Australian Prudential Regulation Authority (Apra) has been more proactive in granting new banking licences to competitors. Until now, Xinja had a restricted banking licence.
Last year, Apra granted its first licence to an Internet-only banking start-up, Volt Bank.
Other digital lenders that have received full banking licences in the last year include Judo Bank and 86400.
"I think there will be more to come, it's early days," said Bell Potter banking analyst T.S. Lim, adding that fintech firms have not been real challengers to Australia's major banks so far.