Australia’s authorities authorised its first banking license to fintech startup volt yesterday, a step the banking regulator says it hoped would improve competition in a sector dominated by four major lenders.
Reuters reported that the Australian Prudential Regulation Authority (APRA) introduced the new “restricted” accreditation for new retail banks on Friday and granted the first such license to volt bank Ltd, an online platform.
The APRA’s move comes just months after it was criticised for failing to stimulate competition and contributing to an environment that promotes record profits for the dominant Big Four: Commonwealth Bank, National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ), and Westpac Banking Corp.
With about AU$1.8 trillion of mortgages on their books, the Big Four dominate the market and hold the lion’s share of deposits and consumer credit loans such as credit cards.
The license allows volt, which has raised AU$15.7 million in equity for research and platform testing, to raise AU$2 million in deposits via its online platform, a spokesman for the company says.
Restricted licensees can call themselves a “bank” but cannot “actively” conduct business and have two years to become fully licensed, according to APRA’s guidelines.
Licensees can seek permission to operate and grow assets to up to AU$100 million while they engage with the regulator to obtain their full credentials, according to the guidelines.
APRA has received several other applications from companies seeking the new restricted license, APRA says on Friday.
“volt bank will show Australians how banking can be done in a simpler and better way,” says volt chief executive Steve Weston.
“The trust between many Australians and their banks has been broken and the path to repair starts with new market entrants who are willing to do things differently,” Weston adds.
Australian banks are currently under public scrutiny after a string of scandals in recent years led to a powerful investigation into misconduct in the sector which has exposed even more abuses of power and unethical conduct by the banks.
The investigation, however, has also revealed unscrupulous practices by smaller financial companies.