APRA green-lights neobank amid local failures

The Australian Prudential Regulation Authority (APRA) has granted IN1Bank Ltd a second extension of its licence to operate for a limited time as a restricted authorised deposit-taking institution (RADI).

In making its decision for an extension, APRA said there were “unique circumstances” in the bank’s application that warranted an extension.

APRA said the decision does not set a “precedent” for other future restricted ADIs and it would consider any possible extension of another RADI licence on its own merits as the need arises.

It marks the fourth bank to be holding a current RADI in Australia, alongside Alex Bank, Avenue Bank and the Islamic Bank Australia.

It also comes after the bank failed to pay its Australian Financial Complaints Authority (AFCA) membership in 2020, which resulted in the authority revoking its membership.

The latest extension has been granted until 12 June 2023, which follows the first extension provided in June 2021 given the “extraordinary circumstances” of COVID-19 and the regulator’s “revised approach” to supervising new banking entrants that “were beyond its control”.

On 11 August 2021, APRA brought in “stronger requirements” for those wishing to be granted a banking licence.

New banking entrants now need to launch both an income-generating asset product and a deposit product before they can secure a full licence, under APRA’s new standards.

The new standards came in the wake of Xinja Bank’s closure in 2021, which saw the transfer of $252 million to customers with the remaining to National Australia Bank.

One year later the shock announcement of neo-lender Volt Bank — the first Australian RADI — also handed back its licence after it could not raise the necessary capital, raising questions around the strength of RADIs.

While the latest neobank to be granted a RADI — IN1Bank — is positioning itself as a “digital bank for individuals and SMEs” it remains in a “launch” phase.

The bank’s website said: “We have commenced our limited launch with staff, families and friends.

“We aim to create integrated value-adding digital products, services and experiences for individuals and SMEs that extend beyond banking.”

It said it’s creating “new and innovative products and services” that extend beyond banking, by combining “leading technology and deep banking knowledge”.

[Related: New banks must have money maker: APRA]