The largest banks in Australia – Commonwealth Bank, Westpac, ANZ, and NAB – have largely dominated the industry. However, luck is not on their side and there are new players looking to destroy the status quo.

Trust has become a huge concern for the largest banks in Australia. Poor lending practices and mortgage broker incentives that have led to customers being badly treated by banks are among the revelations that have already been aired in a Royal Commission into the Australian financial services sector.

CBA CEO Matt Comyn admitted on 8 August 2018 that the bank had failed to serve its customers well.

“We just have to recognise we have not done a good-enough job for our customers. We got some things wrong; we have made mistakes. We absolutely need to make sure we do not make them again,” he said.

However, things are slowly improving for the big players. In January 2019, bank customer satisfaction improved for the first time since the start of the Finance Royal Commission.

The satisfaction level improved marginally from 78% in October 2018 to 78.1% in November 2018, the Roy Morgan’s ‘Customer Satisfaction-Consumer Banking in Australia November Report’ found.

However, with the largest banks in Australia in the middle of a difficult period, who could swoop in and take some market share?

Targeting the largest banks in Australia?

New regulation from the Australian government is letting new entrants to the market. Start-ups with $3m in capital can quality for a restricted banking licence. This is designed to increase competition and put some pressure on the big four.

According to the Australian Prudential Regulation Authority (APRA), this is a fast track to becoming a proper bank if the firm passes the tests. Directors and senior managers need to meet a “fit and proper” test and the business needs to prove its record-keeping systems are reliable.

As a result, a number of start-ups have shown their faces.

Co-founded by Steven Weston and Luke Bunbury, Volt is the first to receive this new restricted banking licence. They claim that it is the first new bank in Australia for 40 years and only the second in a century.

Rather than offering one revolutionary product, it intends to be a full product proposition.

It plans to start with deposits before moving into retail footings to be able to lend. Transaction products will follow.

86 400 aims to transform the banking sector for consumers. The challenger has been working with the Australian Prudential Regulation Authority (APRA) on securing a full banking licence, and plans to launch to the public in early 2019 with transaction and savings accounts.

The new bank’s name, 86 400, represents the number of seconds in a day; the idea being that 86 400 will work to support customers every second of every day.

Judo Bank achieved the second largest pre-revenue fundraising round in Australian start-up history ($98m) last year. It now runs on Temenos Cloud hosted on Microsoft Azure.

Judo Capital launched in March 2018. It aims to support SMEs in Australia that they feel are being left behind by incumbent banks.

The name comes from the ‘Judo Strategy’ which is the art of defeating larger opponents by using the size as an asset. Furthermore, the nimbleness of Judo Bank’s platform allows it to scale quicker and more efficiently.

Xinja has issued over 10,000 cards and overall more than 25,000 people have signed up for Xinja products. In March 2019, Xinja raised A$2.6m in funding and it eclipsed the previous Australian record of A$2.44m which Xinja also holds.

Xinja now has over 2,500 investors. More than 1,500 investors are participating in this round, augmenting 1,222 in the first round held last January.

In addition, Revolut has launched its services in Australia, a year after it revealed its plans to expand in the country.

The UK-based fintech company has launched a public beta version of its app in Australia. Currently, the service will be available for 20,000 people on its waitlist with potential expansion over the coming weeks.

So the largest banks in Australia are not quite scared yet, but it’s only a matter of time. Considering how popular banks such as Monzo have become in other markets, it could be time for the incumbents to up their respective games.