Lender CEO dismisses neobank ‘hype’

Heritage CEO Peter Lock has sought to downplay the role of neobanks as an alternative to the big four in light of misconduct uncovered by the financial services royal commission.

Mr Lock accused neobanks of having a profit-driven appetite that resembled that of the major banks and urged borrowers to reconsider sourcing credit from such lenders.

“More than four million Australians bank with a mutual, and customer-owned institutions hold almost $116 billion in total assets,” Mr Lock said.

“Forget the hype about neobanks – mutuals are the tried and tested alternative.

“Unlike many neobanks, mutuals aren’t owned by big investors looking to make a profit. If you’re turning to them to escape the profit-maximisation excesses of the big banks, then you should think again.”

The Heritage CEO added that “there’s nothing that digital banks and neobanks offer that customer-owned institutions such as Heritage Bank don’t already offer” to borrowers seeking major bank alternatives.

“Customer-owned banks offer market-leading technology, along with great service, highly competitive pricing and a commitment to the best interests of the customers,” Mr Lock continued.

“Our customer satisfaction ratings are way ahead of the big banks, and we aren’t a purely digital platform that is based around technology.

“At Heritage Bank, and the other large mutuals, you get digital capabilities but also branch networks and access to locally based people who can help sort out any issues you might have.”

Mr Lock’s comments follows news late last year that neobank Xinja was granted a restricted banking license by the Australian Prudential Regulation Authority (APRA), ahead of its push for a full banking licence.

Xinja was the second bank to be granted a restricted licence after prudential regulator granted the first licence of its kind to Volt Bank in May 2018.

Further, Mr Lock also sought to highlight the differences between the mutual-banking model and that of listed banks, stating that mutuals do not have the same “profit-maximisation incentives” that he said generated behaviour exposed by the royal commission.

“Regardless of their rhetoric, the listed banks face an inherent conflict between the interests of their customers and the interests of their shareholders,” he said.

“At the end of the day, the listed model exists to serve their shareholders above all else, not customers. They maximise profit to pay their shareholders the best dividends they can.

“The mutual model is the opposite – we exist only to serve our customers.”

He concluded: “We don’t pay dividends to shareholders. We keep any profit we make and put that back into supporting the business and giving customers great value.”

[Related: APRA grants banking licence to neobank]