On Friday (4 May), the Australian Prudential Regulation Authority’s (APRA) new restricted authorised deposit-taking institution (RADI) framework, which is designed to assist potential new entrants in the process of becoming authorised deposit-taking institutions, came into effect.
Under the new framework, eligible entities can seek a RADI licence, allowing them to conduct a limited range of business activities for two years while they build their capabilities and resources.
The framework establishes the eligibility criteria, minimum initial and ongoing requirements and application of the prudential and reporting standards during the restricted phase of operation. It also acts as a guide to help restricted ADI applicants during the licensing process.
APRA chairman Wayne Byres said that a RADI licence was a tangible milestone for applicants, allowing limited activities at an earlier stage of the licensing process than had previously been the case.
“The restricted ADI framework is designed to balance the competing objectives of encouraging competition while maintaining safety and stability in the financial system,” Mr Byres said.
“By making it easier for aspiring ADIs to enter the market, APRA hopes to see consumers benefit from enhanced competition and potentially innovative new business models. However, the limitations imposed on restricted ADI licensees ensure the public can retain confidence that the safety of deposits with all ADIs is adequately safeguarded.”
It has now been announced that the first bank to receive a RADI licence is volt bank limited (volt bank), a new digital bank led by CEO and co-founder Steve Weston, a former CEO of mortgages and managing director of retail lending for Barclays (UK), and deputy CEO and co-founder Luke Bunbury, a former group executive for St. George Bank and Challenger Financial Services Group.
As well as being the first institution to receive a RADI licence, volt has also become the first new retail-focused bank licensed since the early 2000s.
volt bank CEO Steve Weston commented: “The team is delighted to have reached this important milestone of being the first company to receive a restricted ADI licence from APRA as part of the federal government’s innovation agenda and we will be a trailblazer in a new era of banking competition.”
He continued: “volt bank will show Australians how banking can be done in a simpler and better way. With no legacy systems and no branch infrastructure, we are starting from scratch and building a bank the way it should be.
“We acknowledge we are at the start of our journey, but 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.”
volt could expand into mortgages and SME lending
The new digital bank aims to support Australians on their financial journeys, providing customers with real-time insights on spending habits and competitive products.
It will reportedly be “mobile-led and customer-focused”.
Subject to volt bank transitioning to a full ADI licence, the digital bank will first offer customers saving accounts, transaction accounts, term deposits and foreign exchange products.
This will be followed by mortgages, personal loans, credit cards and, in the longer term, small business banking products.
The volt banking platform is set to include:
- smartphone facial recognition technology for bank account openings
- fast transfer of direct debits from external bank accounts to a volt transaction account
- competitive savings and term deposit account interest rates
- straightforward transaction account fees, enabled by a low-cost, digital structure
- financial tools that address budgeting, saving and achievement of goals
- comparison functions to help customers shop around for better deals on regular expenses like electricity, gas, phone and insurance
- competitive foreign exchange rates
Mr Weston highlighted how other bank disrupters, such as Monzo and Revolut in the UK, had provided competition to the lending experience.
He continued: “Incumbent banks have grown complacent and benefitted from the inertia that comes from the difficulty of changing banks.
“Recent events have demonstrated that the big banks have had it too good, for too long. volt bank must earn its success but believes it will have the digital products, capability and experience to stimulate meaningful competition.”
He added that the bank will harness data analytics to provide customers with a clearer picture of their financial position.
“On an opt-in basis, volt bank will show customers if they can save money on monthly expenses such as utilities or insurance and monitor daily spending to help customers stay within their budgets,” the founder explained.
“At the same time, customers will be able to view their bank and credit card account balances, interest rates and transaction history across all accounts regardless of which financial institution they are held with, delivered via one easy-to-use interface, ensuring complete transparency.
“volt bank will remove the archaic processes associated with opening an account and will provide customers with the ability to switch their billers, payees and direct debits from another bank to volt bank almost instantly.”
It is expected that these initiatives will be further supported by the Open Banking reforms that come into effect in 2019.
The volt team includes more than 35 employees with deep banking, technology, data and marketing expertise.
To date, volt has raised $15.7 million in equity capital via three funding rounds.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.